Recent regulation of the sports betting market in Brazil

With the aim of bringing more transparency and security to the gambling market in Brazil, formal regulations were recently published through Law 14.790, sanctioned by the end of 2023.

With the advent of the new law, the regulatory gap that persisted for years has been filled. The betting modality known as “fixed-odds betting“, also referred to as the “betting market”, was supposed to be regulated by the end of 2020, two years after the publication of Law No. 13.756/2018, which legalized this practice. Thus, since 2018, the “betting” market has been legitimized in the country, but it operated without specific rules for supervision and taxation, leaving bettors and sports activities vulnerable to scams and frauds.

Under this regulation, fixed-odds bets are those where the prize amount for each unit of the national currency wagered is determined by a multiplication factor applied to the bet.

The new Law sets out criteria for taxation and regulations governing the operation of betting services, including virtual and physical bets, real sporting events, online games, and virtual events of online games. Moreover, it outlines the distribution of collected revenue, imposes sanctions, and delineates the responsibilities of the Ministry of Finance in regulating, authorizing, monitoring, and overseeing these activities.

The set of regulations that defines the basic rules of operation in the betting market introduces important restrictions and security measures. One of the main provisions is the prohibition of granting concessions to companies whose partners, directors, or members of the corporate board are professional athletes, members of coaching staff, referees, or officials of Brazilian sports teams. This measure aims to prevent conflicts of interest and ensure the integrity of the sector.

Foreign companies interested in operating in the Brazilian fixed-odds betting market may do so by establishing a subsidiary in Brazil. This requirement seeks to ensure that foreign operations are subject to Brazilian laws and regulations, promoting greater control and transparency.

Since the publication of Regulatory Ordinance MF No. 1330/2023 in October 2023, more than 130 companies have expressed interest in acquiring a license to operate fixed-odds betting.

The regulation of this betting market has significant potential to alleviate the country’s unemployment situation and increase revenue. Requirements such as providing customer service for bettors and developing gaming software and platforms will undoubtedly generate more jobs and demand specialized courses.

The government aims to increase tax revenue and ensure a safe and controlled gaming environment with these regulations, with expectations that gaming revenue will range from R$6 to 12 billion per year.

Betting operators must be transparent in the information they provide, and they are only authorized to use bettors’ personal data with their express permission. This regulation aims to establish a basis of trust, ensuring that the rights and personal information of bettors are protected.

Among the measures required by the new regulation is the mandatory granting of operating licenses to betting establishments, which will have to pay R$30 million to legally operate in the country, exploiting up to three brands for a validity period of up to five years. Without these licenses, companies will not be able to sponsor sports events or carry out advertising activities.

Payment for these licenses must be made within 30 days after the completion of the application review process. Failure to meet this payment deadline will result in the definitive archiving of the authorization procedure or the expiration of the authorization, as applicable.

With the enactment of the new Law, the Ministry of Finance has recently published regulations aimed at detailing the necessary procedures for the operation of these activities. These regulations cover aspects such as payment methods, technical requirements for the security of betting systems, and measures to prevent money laundering and other forms of fraud.

The primary objective of both the Law and the accompanying regulations is to provide Brazilians with a healthy and secure environment for entertainment through betting.

To facilitate these efforts, the Ministry of Finance established the Secretariat of Prizes and Betting through Decree No. 11.907, issued on January 31, 2024. This new Secretariat is dedicated to enhancing government actions, particularly in regulating the “betting market”.

Among its responsibilities are monitoring and preventing money laundering, as well as overseeing the market to establish policies for responsible gambling. These policies include measures to prevent compulsive or pathological gambling, to avoid inducing indebtedness, and to protect vulnerable individuals, especially minors. Additionally, the Secretariat is tasked with monitoring and regulating communication, advertising, and marketing activities, among other duties outlined in Law No. 14.790 of 2023.

The regulatory framework of the Secretariat of Prizes and Betting of the Ministry of Finance, along with its Regulatory Agenda for 2024, was established following the publication of Ordinance SPA/MF No. 561. This framework aims to structure the regulation of fixed-odds betting, as outlined in Law No. 13.756 of December 12, 2018, Law No. 14.790 of December 29, 2023, and Regulatory Ordinance MF No. 1.330 of October 26, 2023.

The objectives of the Regulatory Policy of the Secretariat of Prizes and Betting are as follows:

1. Establish prioritized regulatory actions;
2. Ensure legal security, predictability, and efficiency in the regulation process of fixed-odds betting; and
3. Provide a stable, current, transparent, and attractive regulatory environment for sustainable investment.

In the agenda published through the ordinance, the Secretariat of Prizes and Betting of the Ministry of Finance established the regulatory agenda and divided it into 4 phases:

I – Phase 1: Until April 2024

1. Certification Laboratory Accreditation (Ordinance MF-SPA No. 300, dated February 26, 2014)

Requirements and procedures regarding the recognition of the operational capacity of certifying entities for the betting systems used by fixed-odds betting operators and for the live game studios and online games that may be made available to bettors.

So far, the Ministry of Finance has approved four certifying entities for betting and online gaming platforms. They are Gaming Laboratories International LLC, Cogra Limited, BMM Spain Testlabs, and Gaming Associates Europe Ltd.

2. Payment Methods Ordinance

General rules to be observed in payment transactions carried out by agents authorized to operate the fixed-odds betting lottery modality in the national territory.

To discourage bettors from getting into debt, Ordinance MF-SPA No. 615 allows only payments made through Instant Payment (PIX), Available Electronic Transfer (TED), debit or prepaid card, and book transfer to accounts held in the same institution.

Operators are prohibited from accepting financial contributions in cash, payment slips, checks, virtual assets, or other types of cryptocurrencies, payments, or transfers from accounts not previously registered by the bettor, payments or transfers from third parties, credit cards, or any other post-paid payment instrument, and any other form of electronic transfer that may exist.

Only institutions authorized to operate by the Central Bank of Brazil can offer transactional accounts that allow bettors to make deposits and withdrawals in graphic accounts (e-wallets) before the operator or receive prize amounts due to them.

Deposits and withdrawals of financial resources by bettors, as well as the payment of prizes by operator agents, must be made exclusively through electronic transfer. These transfers must occur between a registered bettor’s account with the operator and the operator agent’s transactional account, both held in financial institutions or payment institutions authorized by the Central Bank of Brazil.

3. Betting Systems Ordinance

Technical and security requirements for betting systems used by operator agents to operate the fixed-odds betting lottery modality.

Ordinance MF-SPA No. 722, dated May 2, 2024, defines the technical and security requirements for betting systems, including sports betting platforms and online games. The technical requirements address the technological infrastructure of these systems, which all authorized operators must comply with.

The Ordinance also stipulates that the betting system and the respective data must be maintained in data centers located in the Brazilian territory, although they may, in exceptional cases, be located outside the country. However, they must meet specific criteria, such as being situated in countries with International Legal Cooperation Agreements with Brazil, both in civil and criminal matters, and complying with the provisions of the General Data Protection Law (LGPD).

In order to ensure transparency and security in oversight, it has been determined that the operator agent must grant full access to the betting systems to the units and inspection agents of the Secretariat of Prizes and Betting of the Ministry of Finance at any time.

Furthermore, it has been established through this Ordinance that operator agents are obligated to submit to the Secretariat of Prizes and Betting data related to bets, bettors, bettor accounts, legal destinations, and other operational information. The Secretariat may, at any time, request additional information from the operator.

4. Authorization Ordinance

Rules, conditions, and opening of the procedure for requesting authorization to operate fixed-odds betting throughout the national territory.

According to Ordinance MF-SPA No. 827, dated May 21, 2024, companies seeking to obtain operating authorization issued by the Secretariat of Prizes and Betting of the Ministry of Finance must comply with criteria related to five categories: legal qualification, tax and labor regularity, integrity, economic-financial qualification, and technical qualification.

These criteria were established to protect bettors and ensure that authorized companies have structured governance compatible with the complexity, specificity, and risks of the business.

In addition to the required economic-financial capacity, operators must have headquarters and bettor service channels in Brazil. They must also ensure compliance with policies for preventing money laundering and terrorism financing, responsible gambling, betting integrity, and prevention of match-fixing, as well as adopt good advertising and promotion practices.

Companies already operating in Brazil at the time of the publication of Law No. 14.790 on December 29, 2023, must obtain authorization to operate by the end of this year (2024). They will be subject to relevant penalties starting from January 1, 2025, if they fail to obtain authorization from the Secretariat of Prizes and Betting of the Ministry of Finance.

The Secretariat estimates that the issuance of the first authorizations will be completed by the end of the second semester of 2024.

II – Phase 2: Until May 2024

5. Anti-Money Laundering and Other Offenses Ordinance

Policies, procedures, and controls aimed at preventing and combating money laundering, terrorism financing, proliferation of weapons of mass destruction, and other fraud related to the commercial exploitation of fixed-odds betting.

Stringent measures have been outlined for the prevention and monitoring of illegal practices. Sector operators are required to report suspicious transactions to the Financial Activities Control Board (COAF). This measure aims to protect the integrity of the sector and ensure that betting activities occur within established ethical and legal standards.

6. Rights and Obligations Ordinance

Set of rules to be observed by authorized operators to comply with legal provisions and ensure the rights of bettors.

III – Phase 3: Until June 2024

7. Online Gaming Ordinance

Technical and security requirements for online games that may be made available to bettors by authorized operator agents.

8. Inspection Ordinance

Rules and procedures for monitoring and inspecting the commercial exploitation of fixed-odds betting.

9. Enforcement Action Ordinance

Procedure for imposing administrative sanctions on the commercial exploitation of fixed-odds betting.

IV – Phase 4: Until July 2024

10. Responsible Gaming Ordinance

Regulation of actions aimed at promoting responsible gambling, including measures, guidelines, and practices to prevent pathological gambling in the context of fixed-odds betting, rules for monitoring and preventing bettor indebtedness, and supplementing responsible advertising rules.

The regulation emphasizes responsible gambling, obligating companies to adopt standards to prevent gambling addiction and bettor indebtedness. Betting will be prohibited for individuals under 18 years old, and bettor identification will be mandatory. Operators must provide mechanisms for bettors to set daily limits on gaming time, maximum losses, pause periods, and self-exclusion.

Communication and advertising actions must be guided by social responsibility and the promotion of awareness about responsible gambling.

11. Social Allocations Ordinance

Procedures for effecting transfers to legal recipients as stipulated in §1-A of Article 30 of Law No. 13.756, dated 2018.

The regulation of gambling in Brazil carries significant implications not only for the gambling sector but also for intellectual property rights. The regulation creates a more structured environment for betting operations, which directly impacts the protection of trademarks, software, patents, and industrial designs.

Trademarks

Betting houses aiming to operate legally in Brazil will require licenses and must adhere to various requirements, including brand protection. The regulation is expected to prompt an increase in trademark registration applications related to betting and online gaming at the National Institute of Industrial Property (BPTO).

Furthermore, with the regulation of online gambling in Brazil, the CONAR (National Council for Self-Regulation in Advertising) has issued guidelines for betting advertisements in the country.

Among the rules concerning brands, several content and audience restrictions are implemented to safeguard minors, as online gambling is strictly limited to individuals over 18 years old. It’s mandated that brand profiles be associated with an age-selection tool, and the “18+” symbol or the warning “prohibited for individuals under 18 years old” must always be prominently displayed.

These regulations outlined in Annex X have been in effect since January 31, 2024.

Software

Operating betting games involves specific technologies such as security software, payment systems, and online gaming platforms. Regulation may stimulate innovation and the development of new technologies, leading to an increase in requests for software registrations protected by the Copyright Law (Law 9.610/98) and the Software Law (Law 9.609/98).

Patents and Industrial Designs

The interface of games and the creation of new devices for online gaming are protected through patents and industrial design registrations. With the regulation of games, an increase in the number of patent applications and industrial design registrations is also expected.

The granted patent and registrations of trademarks, software, and industrial design will provide betting companies with exclusive rights to exploit and use their products and services, thus avoiding potential legal conflicts with other companies in the sector.

Regarding the BPTO’s stance on registering trademarks associated with online betting and gambling, an analysis of the Institute’s database reveals both favorable and unfavorable decisions in this regard.

In several cases, during the substantive examination of trademark registration applications aimed at identifying online betting games, the BPTO has issued requirements requesting the trademark applicant to provide clarifications regarding the legality of the claimed service.

Until all regulations are organized through Ordinances and Normative Instructions, many doubts regarding the legal limits of this type of betting will arise and will reflect in decisions regarding registrations involving Industrial Property Rights.