Brazil betting licences to be revoked on Sunday as trade body warns of illegal market surge
The 85 licences granted to sports betting operators in Brazil will be revoked as of this Sunday.
The companies paid a grant of BRL30 million ($6 million), in addition to making a security deposit of BRL5 million. Almost 190 brands that had been operating in the licensed market have lost their authorisation to operate with MP 1.394, without the return of the amounts paid for the grants.
With the regulation of sports betting and online gaming, the government established strict rules, developed by the Secretariat of Prizes and Bets (SPA).
International laboratories were accredited, programmes to combat problematic gambling were created, and KYC rules were implemented, including biometric identification. Furthermore, technical and financial requirements were met.
Companies complied with the rules because they believed in the seriousness of the regulation. The regulation also established an oversight fee to ensure the entire ecosystem complied with legal requirements.
A month ago, they were surprised by Lula’s announcement of Provisional Measure 1,394 – perceived by many as an electioneering measure – which prohibited online betting to “protect families from indebtedness.”
Frustration
A year and nine months after it launched, the regulated market, which adhered to strict rules, was usurped by the very government that regulated it.
“Legal certainty translates into the predictability necessary for long-term investments,” said Carlos Lima, president of the Brazilian Institute for Responsible Gaming (IBJR). “Companies structured complex operations planned for amortisation over 60 months.”
“On 25 October, contractual agreements designed to last five years will be abruptly interrupted, without any maturation period or return on investment,” Lima points out.
According to him, almost BRL2.6 billion was paid in grants and approximately BRL7.5 billion in capital contributions by the operators. According to the executive, this caused a multiplier effect of BRL28 billion in the economy.
The provisional measure came into effect the moment it was issued, on the night of 25 September. Immediately, operators were prevented from accepting deposits and bets. They had only a few days to return the amounts deposited by their clients.
The main trade bodies in the Brazilian gambling sector – the IBJR and the National Association of Games and Lotteries (ANJL) – filed lawsuits with the Supreme Federal Court (STF). They were followed by the Brazilian Association of Radio and Television Broadcasters (Abert) and football clubs. To date, the Supreme Federal Court has not ruled on the constitutionality of the provisional measure.
The provisional measure established a 30-day deadline for the revocation of the licenses. Therefore, the betting sites will wake up on 26 October without their licenses. They will not receive a refund of the licence fees.
Uncertain future
Beyond the legal battle, still pending a decision from the STF, the sector is awaiting the processing of the provisional measure in the National Congress. Parliament has until 25 November to analyse the measure. However, the Joint Committee for Provisional Measure 1,394 has not yet been established. It has appointed members, but no president or rapporteur has been appointed.
Nearly 100 amendments were presented to the provisional measure, most of them maintaining the activity, but without online casino, leaving only sports betting.
Congress can extend the voting period for the provisional measure by 60 days, pushing the review deadline to March 2027. From 9 November onwards, it will block the agenda of the National Congress.
Given this scenario, Carlos Lima questions what will happen to the licences, which expire on 25 October.
“If Congress rejects the provisional measure, what happens to the expired authorizations?” he asked. “Will it be necessary to pay a new fee? The situation remains legally uncertain.”
He emphasises that bettors will not stop betting. The migration to illegal sites will lead to an increase in the black market, currently estimated at between 38% and 44% of the total market, according to a study by LCA Consultores. Lima points out that since the ban on betting, the movement towards clandestine sites has gained strength. There are already more than 30,000 illegal sites operating in Brazil.
Beyond the reach of inspection
“These operations do not collect taxes in Brazil, do not require identity verification or facial recognition,” Lima explained. “They do not provide self-exclusion tools and operate completely outside the scope of oversight by the Council for the Control of Financial Activities (Coaf) and the Federal Police.
“Regulated companies accept and defend the continuous strengthening of the regulatory framework, understanding that the constant improvement of rules is the only way to protect the consumer without leading them towards illegality.”