With the deadline for license applications passed on August 20, a total of 113 operators have secured their place in Brazil's emerging legal betting market, ensuring their applications will be processed by the January 1, 2025 launch date. This follows a 90-day window that began in May, during which the initial number of applications appeared underwhelming. However, a late surge, driven by the release of key ordinances, has demonstrated significant industry interest.
A Last-Minute Rush After Ordinances Spark Interest
At the start of the 90-day window, the response from operators was tepid, with only Betano, owned by Kaizen Gaming, submitting an application by the end of June. This slow start led to concerns that the number of applications would fall short of industry expectations. However, the publication of crucial ordinances, particularly the final ordinance on sanctions on July 31, ignited a wave of applications, with 108 of the 113 total applications coming in after this date. A pivotal piece of legislation, Normative Ordinance No 1,207, which clarified the games allowed online, was among the last to be published, playing a key role in this uptick.
Despite the final count falling short of the 134 operators who had initially expressed interest earlier in the year, the Brazilian government is reportedly pleased with the outcome.
Neil Montgomery of the Brazilian law firm Montgomery & Associados remarked, "The prizes and betting secretariat (SPA) of the ministry of finance must have released fireworks in Brazil when the tally of applications for a federal licence comfortably surpassed 100."
He added that the number of applications for license exceeded the SPA’s expectation of around 40, marking a significant milestone for the federal government and indicating robust interest in the Brazilian regulated market.
Brazil's gambling industry is poised to become one of the most dynamic in the world. A recent report from the International Betting Integrity Association (IBIA) projected that the market could reach $34 billion in sports betting turnover by 2028, with an onshore gross win of $2.8 billion. However, the high number of license applications comes despite substantial challenges facing operators, including a hefty license fee of BRL 30 million and strict regulatory requirements for accreditation and ongoing compliance.
These stringent regulations have raised concerns about the viability of smaller operators entering the market.
Yet, according to Udo Seckelmann, head of gambling & crypto at Bichara e Motta Advogados, the potential of Brazil's betting market is too great for operators to ignore. "This clearly shows that the igaming industry in Brazil craves for a professional environment, with clear rules and legal certainty,"
Seckelmann observed, emphasizing the importance of the legal framework in attracting such a high number of applicants.
Will the Review Process Meet the Deadline?
Despite the strong interest, there are concerns within the industry about whether the application review process will be completed in time for the planned January 1, 2025, launch. The final regulations were published just three weeks before the August 20 deadline, leaving a little over four months for the SPA to process the large volume of applications.
Montgomery shared insights from a recent meeting with the federal regulator, indicating that the SPA has developed a plan to manage the influx of applications. "I was informed that the SPA will reach out to applicants within 35 days of their applications being submitted to let them know whether the documentation submitted is in order or whether anything needs to be adjusted or supplemented before the ministry of sports receives the application to give its opinion on the same," he explained.
Seckelmann suggested there might also be flexibility during the "transition period" to ensure that the necessary scrutiny is applied to all applications.
While the focus is on the new legal market, there are concerns about whether the regulations will effectively combat the existing black market. An IBIA study warned that stringent market restrictions could result in up to $18 billion a year being wagered offshore, which would undermine player protection efforts and result in over $1 billion in lost tax revenue between 2025 and 2028.
Seckelmann emphasized the importance of the government's ability to enforce the new legal framework, especially in curbing offshore betting. Normative Ordinance No 827 outlines sanctions for operators active without a license by the start of the New Year. "We will have to wait and see whether the federal government will stick to its promise of fiercely enforcing the current legal framework against the black market as from 1 January 2025," Seckelmann stated. "The SPA has publicly said that it will have the necessary tools to do so. We will simply have to wait and see."
Alternative Licensing Options and Government Revenue
Some operators may opt for an alternative route by obtaining state lottery licenses, such as those offered by Rio de Janeiro's Loterj. This option has been controversial, with accusations that Loterj is overstepping its authority by allowing licensees to operate nationwide through a less costly and less demanding licensing process. Montgomery noted that Loterj's latest application window attracted close to 50 requests, despite an ongoing court case challenging the legality of its operations. He suggested that this route could offer significant returns for operators not interested in pursuing a federal license, especially given the uncertainties surrounding the federal licensing process.3
Despite evangelical opposition and concerns about gambling addiction, the economic benefits of legal betting in Brazil are clear. While full tax revenue from the new market won’t be realized until 2025, the initial license fees alone represent a significant financial boost for the government.
Source:
''Priority window closes for Brazil licence applications as 113 apply in total'', igamingbusiness.com, August 21, 2024.
''Consulta Pública de Solicitações do SIGAP'', sigap.fazenda.gov.br.
