In a landmark twist of events, Rede Loto has become the very first operator in all of Brazil to receive an inaugural sports-betting licence.
The state lottery of Rio’s accreditation will see the São Paulo-based operator afforded the right to operate fixed-odds sports-betting across the entirety of the state of Rio de Janeiro. The licence will cover an initial 5-year term which set Rede Loto back R$5m (approximately US$1m) in upfront costs.
This decision has added even further complexity to the landscape regarding gambling legalisation, with much anticipated federal attempts to bring gambling in all its multi-faceted forms, which includes sports-betting, to the entirety of the South American nation.
Legislative landscape in Brazil
Due to the Misdemeanour Criminal Act (MCA), gambling in almost every form has been illegal since 1941 across Brazil’s sizeable territories.
Despite this, Brazil is an avid gambling nation, with sports and thus sports-betting being an incredibly popular aspect, interwoven into Brazilian culture and the strata of its society. So much so that in 2022 it was estimated that over 46% of Brazil’s population, the 5th largest in the world, was involved in some form of sports-betting activities alone.
This sizeable industry, worth well over $6 billion annually, is only truly possible on this scale due to the emergence and dominance of online gambling operators who conduct their activities into the Brazilian market from bases off their shores.
This is actually not an illicit practice, as the MCA is applied to activities effective within Brazil from an operational standpoint. Operators outside of Brazil must be within the legal limit of their own jurisdictions to provide legal and valid gambling offerings to the Brazilian market.
Although this does a great deal to satisfy the appetites of the gambling population in Brazil, this does affect Brazil in the sense, that a massive stream of tax revenue is being lost. Such a massive loss in the sense that Brazil houses perhaps the largest illicit market in the world, and potentially one of the world’s largest should legalisation be achieved.
Although a considerable effort is currently being made by the federal government in Brazil, there have in recent weeks been several hindrances and roadblocks causing an unfortunate delay, with congressional leaders remaining in discussion with regards to deciding if sports-betting should be regulated on a nationwide or state-specific level.
The plan was initially thought to be a national regulation through a so-called provisional measure emergency decree, which was considered more immediately imminent when a draft of this legislation was circulated to the industry and media.
A more standardised bill with urgent requirements is being considered after a reassessment instead. This would be differentiated in several ways, not least that a provisional measure would have taken effect immediately to its approval, whereas an urgency bill would be subject to a 90 day congressional approval process and would then require ratification.
Luiz Felipe Maia, a gambling law expert and founding partner at the law firm, Maia Yoshiyasu in São Paulo, has provided an analysis of the pending situation, stating that he believes no license on a federal level will be granted in the near future.
However, a few states such as is the case in Rio, will be granting licences that will afford operators the right to trade within state jurisdictions. This is because state legislatures are not plagued by the same issues that are causing difficulty in federal proceedings.
On the other hand, we’re going to have licences in Rio, in Paraná, in Paraíba. That’s going to be a very complicated situation for the government. Because on the state level, things are moving quite quickly.
He mentioned that the states of Paraná and Paraíba are following Rio’s lead closely and hope to implement similar systems to grant lotteries the right to include sports-betting in their offerings.
Alternatives to this such as in Minas Gerais have also sprung up, whereby lottery providers are setting up exclusive agreements with technology partners to launch new, dedicated sports-betting operators.
Considerations and drawbacks
Although state regulation is moving much faster than its federal counterpart, perhaps acquiring a state licence is not the most prudent choice at this moment in time, as these may become redundant if the provisions in the federal legislative drafts are to be believed.
This specifies that players must be located only within the state in question to play the operator’s online sports lottery games, and additionally, states will be forbidden from creating multi-jurisdictional lottery operations.
The drawbacks don’t cease there as Bichara & Motta gaming lawyer, Udo Seckelmann, has claimed:
The payments platform that accredited operators will be required to use charges such as a hefty transaction fee for every deposit and withdrawal, which on top of taxes and licensing fees, is unappealing to the operators I have spoken to.
He would continue that further measures could be implemented to prevent players from making use of the grey market, that is gambling activities acting without a valid licence or ones acting with a state licence outside of their jurisdiction.
This would be enforced by methods such as “the blocking of IPs and the restriction of payment providers for unlicensed operators, and the prohibition of the advertising in Brazil by unlicensed operators”.
This of course is all speculation for now, but nonetheless, with this inaugural license being issued, further confusion has been added to an already complex landscape which operators and regulators should consider and reconsider on a frequent basis, as Brazil begins to embark on the harnessing of what is certain to become a key industry both locally and across the globe.
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