Brazil’s draft sports betting decree in focus

20 September 2019

Leading Brazilian gaming lawyer Neil Montgomery of Montgomery & Associados analyses the draft Decree regulating fixed-odds sports betting.

The first half of September has seen intense activity at the Ministry of Economy insofar as the drafting of the future regulations for fixed odds sports betting in Brazil is concerned. Last Friday (13 August) saw the release by the regulator (SECAP) of the eagerly awaited first draft of the future Presidential Decree regulating Law No. 13,756/2018, which legalized sports betting in Brazil.

This draft has been released to public consultation with a view to receiving contributions from the industry and interested parties, by 27 September.

There are signs that the regulator released the draft in a hurry since there are certain hiccups in the text, such as an incorrect reference to 2019 as the year in which Law No. 13,756 was enacted. In addition to the draft missing an article 7, Chapter IV jumps to Chapter VI without there being a Chapter V - which may suggest that an entire chapter may have been deleted at the last minute and the remaining chapters not having been renumbered.

Such a rush may have also compromised the comprehensiveness of the text, which may frustrate the market to a certain degree. A large number of articles in the draft Decree refer to future regulations that are still to be issued by the Ministry of Economy, which means that the regulatory saga is not yet over.

A big relief comes from the fact that SECAP has now officially confirmed that the licensing model (that of authorisation) will allow multiple operators into the market, rather than a concessions-based system, as had been revealed first by Montgomery & Associados in late May. This means that an unlimited number of licences will be made available to all applicants satisfying the requirements set out in the law and regulations. In this regard, the draft Decree confirms that only companies duly incorporated in Brazil, and with their registered offices and management located in Brazil. will be eligible to apply for a licence.

Such companies, as well as their shareholders, management and even legal representatives and attorneys-in-fact, will also have to be in good standing before the competent authorities and courts to succeed in securing a licence. With SECAP expecting to grant around 150 licences, this means that there will be a rush of foreign operators incorporating their own local subsidiaries and securing protection of their intellectual property (domain names, trademarks, etc.) as quickly as possible.

It is surprising to note, however, that the draft Decree does not confirm certain elements made public by Alexandre Manoel Angelo da Silva, the National Secretary for the Evaluation of Public Policy, Planning, Energy and Lotteries of the Ministry of Economy, at an event organized by the Brazilian Football Confederation (CBF), in São Paulo, earlier in September. At that event, Manoel Angelo da Silva revealed a R$3m licence fee for applicants, and that licences would be valid for nine years.

The draft Decree does, however, confirm the need for operators to have their own financial reserves of at least BRL6 million, which was also announced by the National Secretary at such event.

Other more sensitive areas covered at the CBF event, such as taxation of 1% of turnover (not over gross gaming revenue) and fixed monthly fees due from licensees, (different to those contemplated in the Annex to Law No. 13,756/2018), have been left out of the text, probably because they require Congressional approval.

On a more positive note, the draft Decree aims to combat fraud, money laundering and other wrongdoings perpetrated by operators and their agents and to promote responsible betting and advertising.

The draft text ends by stating that licensed operators will only be in a position to start their Brazilian operations when a number of conditions precedent have been satisfied, including by the Ministry, and that this will not be sooner than 6 months after the enactment of the Decree.

It follows from the above that it is very likely that the Ministry of Economy will receive a large number of contributions commenting on the contents of the draft Decree. If such number is to exceed the record breaking 1,849 contributions received at the end of August in response to the first public consultation promoted by SECAP is yet to be seen.

Neil Montgomery is the Founding and Managing Partner of Montgomery & Associados (www.montgomery.adv.br), at which he heads the law firm’s Minds Sports, Draws, Gaming, Betting and Lottery Practice Group. Neil represents Brazil as a General Member at IMGL, is a published author and a regular speaker at international gaming and betting events.