Brazil Unveils Long-Awaited Sports Betting Regulations

The provisional measure, which became effective immediately upon its publication on July 25th, allows Congress a 120-day window to approve, reject, or modify it. The changes presented in this measure modify Law 13756, initially signed in December 2018, which had originally set a tax rate of 3 percent on online betting turnover, later revised to around 5 percent of gross revenue.

The headline tax rate has now been substantially elevated to 18 percent of gross revenue, two percentage points higher than the previously leaked draft of the legislation from May. This rate does not encompass additional corporate and social security taxes, which amount to an extra 9.25 percent, and operators will also be required to pay municipal taxes.

The reason for the Brazilian government’s decision to increase the tax rates for sports wagering remains speculative, according to Luiz Felipe Maia of Brazilian law firm Maia Yoshiyasu.

Thomas Carvalhaes, the managing director of Brazilian online gaming platform Vai de Bob, criticized the change, citing that the 2 percent increase, when combined with other Brazilian taxes, could potentially reach almost 40 percent.

While the move to regulate the sports betting market is seen positively from an overall standpoint, Carvalhaes expressed concern that the high tax rate could discourage companies from legally exploring this sector in Brazil.

Rafael Marcondes Marchetti, legal director at the Brazilian fantasy sports operator Rei do Pitaco, suggested mitigating the impact of the high tax rate by reducing the proposed upfront licensing fee.

The provisional measure also introduces various penalties related to sports betting, such as operating without proper authorization or promoting unlicensed betting operators. Internet service providers (ISPs) will be required to block unlicensed sites upon notice from the Ministry of Finance.

The measure grants Brazil’s Ministry of Finance the authority to establish specific regulations for advertising, with additional self-regulatory guidelines applicable from Brazil’s advertising standards authority CONAR.

The measure further clarifies that both national and international companies established in Brazil can obtain an unlimited number of licenses, and it defines eligible sporting events for wagering while allowing the finance ministry to restrict or prohibit specific bet types.

Although the provisional measure does not include provisions to limit sports betting regulation at the state or municipal level, an accompanying sports-betting bill proposes additional changes to the original 2018 law, empowering the Ministry of Finance to apply temporary penalties, implement anti-money laundering measures, and adjust regulatory fees based on inflation.

The Ministry of Finance anticipates generating around R$2bn (approximately US$420m) in annual revenue initially from legal sports betting, with potential for growth to R$6bn to R$12bn in a fully regulated market.