Brazil’s Game Changer: Online Gambling Regulation Approved for 2024
In a historic move, Brazil’s chamber of deputies voted on December 21, 2023, to approve Bill 3,626/2023, clearing the path for the regulation of online gambling in the country. This significant decision followed the senate’s plenary approval of the same bill on December 12, 2023, setting the stage for a new era in the Brazilian gaming industry.
With the chamber of deputies’ approval, the bill will now be forwarded to the office of President Luiz Inacio Lula da Silva for final endorsement, solidifying the last step in Brazil’s gambling regulation process.
The Final Process of Brazil’s Gambling Regulation
Although the chamber of deputies had previously given its approval for online gambling regulation in September, it was necessitated to vote once more to ratify the amendments made to the bill by the senate in the preceding week. Senator Angelo Coronel introduced the bill to the senate on December 12, incorporating a series of changes following the initial approval by Brazil’s Economic Affairs’ Commission three weeks prior.
During the senate deliberations, three significant amendments were considered. Besides the reinstatement of igaming into the bill, the senate also decided to exclude virtual games and sports betting terminals. Additionally, an amendment that would have prohibited sports betting advertising in stadiums was rejected.
The Economic Affairs Commission’s recommendations on taxation, made on November 22, were fully approved. This means that gross gaming revenue (GGR) will be subject to a 12% tax, down from the originally proposed 18%. Taxation on bettors’ winnings has also been adjusted, with a yearly 15% tax on net winnings, surpassing the BRL2,112 exemption threshold.
Licensees will be required to pay an initial fee of up to BRL30 million, entitling them to operate under up to five different brands.
The Return of Igaming to Brazil’s Gambling Regulation
The restoration of igaming in the bill was a notable turn of events. While the senate initially voted to exclude igaming, the chamber of deputies retained the authority to reverse this decision. In an interview earlier this month, Neil Montgomery, founder and managing partner of Brazilian law firm Montgomery & Associados, anticipated opposition to igaming from the senate, particularly from the Evangelical Parliamentary Front.
Deputy Eli Borges, a leader of the Evangelicals, emphasized during the vote that they were taking a significant step forward in involving Brazilian citizens in an unprecedented situation. However, Arthur Lira, the president of the Chamber, countered Borges’ criticism by highlighting that the proposal had already received approval from deputies in September and from the senate, where many aspects of the bill had already been negotiated.
Lira emphasized the importance of regulating gaming platforms to prevent issues like money laundering, stating that postponing the vote would not make online games disappear. The exclusion of physical gaming or casinos from the bill was made at the request of the Evangelical Parliamentary Front.
Budgets and Taxation Implications
The exclusion of online gambling from the bill had significant implications for taxation revenue. Originally targeting BRL1.6 billion, the removal of igaming could result in only BRL700 million in revenue, falling far short of initial expectations. This poses a challenge to the Brazilian government’s aim to achieve a zero fiscal deficit in 2024.
Assuming the current bill receives presidential approval, 36% of the tax revenue will be allocated to sports, with 28% allocated to tourism. Public safety initiatives will receive 14%, while education and social security will each receive 10%.
Inspection fees are also set to change, moving from a calculation based on premium amounts to a system based on lower levels of GGR. Operators must secure approval from the ministry of finance to operate in Brazil and have a Brazilian partner holding a minimum of 20% of the company’s capital in the country. Stringent cybersecurity measures and identification processes will be mandatory.
Unlicensed operators will be barred from advertising in Brazil, and B2B partners will be prohibited from providing technology to unlicensed B2C companies. Bonuses will also be banned, adding further regulation to the industry.
The Journey to Brazil’s Gambling Regulation
Brazil’s path to legalized sports betting and casinos has been lengthy and convoluted. It all began in May 2023 when Brazil’s government introduced PM 1,182 for sports betting. After President Da Silva’s approval, the PM became law in July. Initially met with resistance due to the 18% tax rate, advertising restrictions, and unclear payment regulations, the PM paved the way for Bill 3,626/2023.
This bill, approved by the chamber of deputies in September, introduced the significant addition of online casinos to the gaming landscape. Despite the taxation rate remaining at 18%, it marked a critical step towards the comprehensive regulation of Brazil’s gaming industry.
Outlook for 2024: Our Opinion on Brazil’s Gaming Market
The approval of Bill 3,626/2023 sets the stage for an exciting and dynamic year ahead in Brazil’s gaming market. With online gambling now officially part of the regulatory framework, operators and enthusiasts can anticipate a surge in activity and investment.
While the taxation rate has been reduced to 12%, the industry remains highly lucrative, and the allocation of tax revenue to sports, tourism, public safety, education, and social security promises significant positive impacts across various sectors of Brazilian society.
Furthermore, the stringent regulations, cybersecurity measures, and identification processes will enhance the integrity of the industry, ensuring a fair and secure environment for both operators and players.
As the Brazilian government strives to achieve a zero fiscal deficit in 2024, the gaming industry is poised to contribute significantly to this goal, providing a boost to the country’s economy.
In conclusion, Brazil’s journey towards regulated online gambling has been a challenging one, but the recent approval of Bill 3,626/2023 signals a bright future for the industry in 2024. With careful oversight, responsible gaming practices, and a focus on tax allocation, Brazil is set to emerge as a thriving market for both operators and players alike.
