Before we delve into the complex legal history of sports betting in Brazil, let’s start off with last week’s key step.
Last Tuesday (21 November), the industry was waiting eagerly for Brazil’s Economic Affairs Committee (CAE) to vote on whether to greenlight sports betting and igaming through Bill 3,626/2023. This was delayed by one day on the request of senators, according to Senado Noticias.
The CAE’s eventual approval on Wednesday 22 November gave the thumbs-up for the bill to move to the Senate plenary. This session will now take place this Wednesday (29 November). If the plenary vote goes in the bill’s favour, sports betting and igaming will officially be legal in Brazil.
Importantly, the outcome at the CAE confirmed that operators will be subject to a 12% tax rate. This is a significant reduction from the 18% outlined in Provisional Measure (PM) 1,182 – more on that later.
In terms of how this will be distributed, 36% of the tax will be directed to sports and 28% will go to tourism. Public safety initiatives will be given 14% and 10% each will go to education and social security.
An attempt to remove igaming – which was added to the bill in September – from the bill was also struck down.
Now we’re all caught up, let’s take stock of how we got to this point.
How did we get here?
Brazil’s sports betting journey really kicked into gear in 2023 – and only around halfway through the year too. In May, Brazil’s government announced PM 1,182 for sports betting. The PM was given the all-clear by the president, Luiz Inácio Lula da Silva. Da Silva signed it into law in July.
As with most attempts to invigorate a new law, the PM was widely criticised. The main points of contention were the aforementioned 18% tax rate, advertising restrictions and ambiguous regulation around payments.
At the time, Luiz Felipe Maia, founding partner of Brazilian law firm Maia Yoshiyasu Advogados, told iGB much of the criticism centred around tax.
“The reactions [to the PM] are 99% negative,” he said. “This is because of the taxation, because of the restrictions – but mostly because of the taxation.”
But Bill 3,626/2023 was just around the corner. The bill was introduced later and made amendments to PM 1,182. The biggest change was clearly the addition of online casino.
However, it kept the controversial 18% tax rate in place. We now know has been amended and lowered to 12%. Bill 3,626 was approved by Brazil’s Chamber of Deputies in September.
Last month, Brazil’s ministry of finance published the conditions for operating sports betting in the country. One of the stand out measures is that would-be operators need to operate a subsidiary in Brazil in order to gain a licence.
What does the industry think?
The industry has been tuned in for every twist and turn of the Brazil sports betting saga. This latest development is no exception.
Neil Montgomery, founder and managing partner of Brazilian law firm Montgomery & Associados, says he was not surprised to learn of the CAE’s approval, “since the federal government is pushing for the approval to contribute to helping achieve zero fiscal deficit next year”. Montgomery is referring to the Brazilian government’s aim to hit a zero-deficit target in 2024.
What really surprised Montgomery was the “inclusion of a 20% Brazilian ownership requirement for operators applying for a federal licence”.
“This is a significant market entry barrier since the majority of operators intending to obtain a federal licence are foreign and would, in principle, not be willing to team up with local shareholders,” he explained. “We will have to wait and see whether this requirement is dropped or, if ultimately approved by Congress, is vetoed by the president – there being a chance of Congress overriding the veto thereafter.”
Hugo Baungartner, VP for global markets at Aposta Ganha, explained that reactions to the bill have been “all positive”. But he admitted that the fight isn’t over yet. “There is still a way to go, but I am confident.
“Finally we can see some advance on the gambling market regulation as we all know that the online sports betting market is a reality.”
Both Montgomery and Baungartner have appeared on iGB’s World Series of Politics podcast, discussing the ins and outs of the journey to legal sports betting in Brazil.
iGB is running a special webinar on 28 November in partnership with IDNow, make sure to catch the latest developments ahead of the on the Senate plenary vote. Register now to secure your place.
Original article: https://igamingbusiness.com/sports-betting/sports-betting-regulation/brazils-upcoming-vote-everything-you-need-to-know/
