Contributed By FYMSA Advogados
Brazil is the largest and most populated country in Latin America, with a total area of 3,265,080 square miles and a population of more than 212 million people (it is the fifth-largest country in the world with regard to size and the sixth in population). Brazil is a federation divided into 26 states, one Federal District and 5,570 municipalities.
Almost all gambling activities have been prohibited in Brazil for over 75 years. In Brazil, gambling does not have a legal definition. Instead, Decree-Law No 3,688/1941 (the “Misdemeanours Law”), drafted with the intention of preserving social morality, provides in Article 50 for the prohibition of “games of chance”, punishable with imprisonment for three months to one year, and a fine for those who establish or carry out games of chance in a public place or place accessible to the public, by means of the payment of an entry fee or otherwise. There are three definitions of “game of chance”:
Since the general ban on games of chance in 1941, the only legal gambling activities are the lotteries under the state monopoly and horse race betting. According to Brazilian case law, poker is considered a game of skill and, therefore, is not illegal.
Several bills of law are currently under discussion in the Congress, comprising integrated resort casinos, bingos, online gaming and lotteries.
After a gambling ban of more than 75 years, with a brief and failed attempt at regulation of bingo in the 1990s, Brazil has recently seen some development in terms of gambling activities.
Poker, although unregulated, is legal in Brazil, as it is considered a skill-based game. This understanding has been confirmed by several court decisions.
The opening of the Brazilian gambling market started with the creation of the virtual and land-based instant lottery called LOTEX by Law No 13,155/2015.
Law No 13,756/2018 created fixed-odds sports betting as a lottery modality, granting powers for the Ministry of the Economy to regulate it and issue the respective licences. According to the Law, the Ministry of the Economy has up to four years to complete the regulation.
Public Consultations Issued by SECAP
The Secretariat for Public Policy Evaluation, Planning, Energy and Lottery (SECAP), which is under the Ministry of the Economy, is in charge of regulating sports betting and has already issued three public consultations on the matter.
The first public consultation, published in July 2019, had seven general questions regarding regulation and aimed to gather opinions from the public and understand the market’s expectations prior to the issuance of any ruling on the subject. The second public consultation, published in September 2019, aimed to collect contributions to a draft Decree on Fixed-Odds Sports Betting. Finally, the third public consultation, published in February 2020, introduced a new draft decree in light of a legal opinion issued by the Ministry of the Economy's legal staff.
As per the contents of the third public consultation, the bidding procedures would have 30 licences available under a concession model and would be held in periods of six months until the supply of the national market with a limited number of companies operating in such activity or, in different cases, up to a period of four years after the first public bidding session. The number of 30 licences is likely to be increased, according to the regulator.
The draft proposed by the regulator in the third public consultation and the number of concessions being limited to 30 were left behind by the regulator after the change in the command of the SECAP in the first semester of 2020.
On 10 June 2020, the Council of the Investment Partnerships Program included fixed-odds sports betting in the Program. With this resolution, the National Economic and Social Development Bank (BNDES) will lead the concession process under the supervision of the Ministry of the Economy, as approved by Decree No 10,467/2020.
BNDES is expected to hire independent experts to assist in the economic and regulatory modelling of the concession and SECAP will use the studies from those experts to suggest the necessary changes to the Sports Betting Law with the support from BNDES and the government for the concessions to be successful.
Courts Establishing Important Precedents
While the Congress is slowly progressing in the legalisation and regulation of gambling activities in Brazil, the courts are having a noteworthy role in the definition of gambling-related precedents.
On 23 November 2015, a court decision in the southern state of Rio Grande do Sul ruled on the grounds that gambling is not illegal since the prohibition set out in Article 50 of the Misdemeanours Law would be unconstitutional (Case No 0042094-45.2015.8.21.9000 from the State Court of Rio Grande do Sul). The public attorney has appealed the ruling before the Brazilian Supreme Court (RE 966177), where such appeal has been granted “general repercussion” effects, meaning its final award will be binding upon all other similar cases in the country.
On 6 June 2020, the Brazilian Supreme Court ruled (RE 634764) that the local tax on services (ISS) can be levied on betting activities and that the constitutional tax basis for horse racing is the amount of the “take” (equivalent to gross gaming revenue, or GGR). This is a seminal precedent for future discussions on the tax basis of sports betting, so that it can be argued that ISS can only be levied on the GGR of sports betting.
On 17 June 2020, a São Paulo circuit judge ruled (Case No 1038886-96.2017.8.26.0053 from the 16th Public Treasury Circuit Judge of São Paulo) that ISS cannot be levied on the whole amount of the buy-ins of poker tournaments, but only on the fees earned by the organiser (ie, total buy-ins minus prizes). The municipality of São Paulo has appealed, and the case is pending judgment by the State of São Paulo Court of Appeals.
Finally, on 30 September 2020, the Brazilian Supreme Court also ruled unconstitutional the federal monopoly on lottery operations (ADPF 492, ADPF 493 and ADI 4,986). As a result, states were found to have the right to operate all the exact same lottery modalities created by the federal law. The federal government retains the exclusive constitutional competence to legislate on lottery issues, while the states and the Union share the right to operate the games.
This last ruling has a direct impact on sports betting, which was created as a lottery modality by Law No 13,756/2018. The official publication of the ruling is still awaited so that the exact effects can be assessed, but it is likely that all states will be able to operate sports betting within their territories. In this scenario, the federal government will be able to issue federal licences that will allow the federal licensees to operate both online and retail businesses all over the national territory, regardless of any state licence. At the same time, each state will be able to operate sports betting within its borders, directly or with a private operator as a partner. Since making a state lottery available outside the respective state territory is a criminal misdemeanour in Brazil, there will be a lot of discussion on how the place where the online bet is made will be determined.
Delay to Privatisation Process for Sports Betting
All the unexpected complexity has halted the privatisation process for the moment. It is likely that the Ministry of the Economy and BNDES will postpone any further advancement until they clarify the impacts of the Supreme Court ruling on the potential market and regulation of sports betting.
Also, as a result of that ruling, now that every state and the Federal District will be entitled to offer instant lottery products, in October 2020 the consortium formed by IGT and Scientific Games announced it was forfeiting the award of LOTEX even before executing the concession contract under the justification that the negotiation with Caixa to sell tickets at their accredited points of sale was unsuccessful.
Online fixed-odds sports betting was legalised by Law No 13,756/2018, and the Ministry of the Economy is currently working on the regulation, which is not expected to be issued until 2021. Pari-mutuel betting and head-to-head betting on sports events are prohibited.
Horse Race Betting
Horse race betting is regulated by Law No 7,291/1984 and Decree No 96,993/1988. Horse race wagering is restricted to non-profit entities that own the racetracks, and are duly authorised by the Ministry of Agriculture, Livestock and Food Supply. These entities may operate betting websites focused on horse racing content.
Online bingo is prohibited in Brazil.
Online casinos are prohibited in Brazil
The state-owned Caixa Econômica Federal (Federal Savings Bank) currently runs the federal lottery and has recently launched a website to sell lottery tickets. All state-owned lotteries operating in Brazil are also authorised to offer their products online.
Poker has been recognised as a sport by the former Ministry of Sports, now the Secretariat of Sports, an agency of the Ministry of Citizenship. As a skill-based game, online poker is permitted, but there is no regulation in place. There has been some discussion as to whether only poker tournaments should be legal, or if ring games should also be authorised. Based on the civil law concept of betting, it is understood that ring poker games cannot be classified as a form of sports betting, even if they involve real money. Hence, provided that the rules of a ring game establish that the player must play for a minimum amount of time before being able to leave the table, the multiplicity of hands is enough to argue that the outcome of the game relies more on skill than chance, being legal in Brazil.
Fantasy sports are not regulated in Brazil. Based on the fact that the result of a fantasy sports game depends more on the knowledge and skill of the players than on chance, it is understood that fantasy sports are permitted in Brazil.
Social gaming is not regulated in Brazil. However, it is permitted, provided that chance is not the sole or preponderant factor in determining the final result of the game, or that the players are not entitled to win prizes with monetary value.
Offshore Gambling Offer
The territorial restriction set forth in Article 2 of the Misdemeanours Law – according to which, Brazilian law is only applicable to a misdemeanour committed in Brazilian territory – currently allows offshore online operators to offer their betting services to Brazilian residents.
Bets and games are types of contracts according to the Brazilian Civil Code (Law No 10,406/2002) and one of the general rules is that a contract by and between absent parties is deemed as executed in the place of the proponent. This is set forth by Article 9, paragraph 2 of the Law of Introduction to the Brazilian Rules of Law (Decree-Law No 4,657/1942) and repeated in Article 435 of the Brazilian Civil Code. Hence, if an offshore operator’s website is hosted in another jurisdiction where gambling is authorised, the contract between the Brazilian client and that operator is valid and subject to the law in the operator’s jurisdiction, being out of the scope of the Misdemeanours Law. Please note that these contracts are still enforceable in Brazil and the respective debts can be collected in this country.
Land-based fixed-odds sports betting was legalised in December 2018 by Law No 13,756/2018, and the Ministry of the Economy is currently working on the regulation, which is not expected to be issued until 2021. Pool betting, betting exchanges and head-to-head betting on sports events are prohibited.
Horse Race Betting
Horse race betting is regulated by Law No 7,291/1984 and Decree No 96,993/1988. Horse race wagering is restricted to non-profit entities that own the racetracks, and are duly authorised by the Ministry of Agriculture, Livestock and Food Supply. These entities may appoint agents to facilitate wagering on their behalf, and can also hire private suppliers, which are not subject to licensing or any specific regulation.
Commercial bingos are prohibited in Brazil. In 2015, Law No 13,019/2014 was amended by Law No 13,204/2015, to include Article 84-B, which states that civil society organisations will be entitled to distribute or promise to distribute prizes – through sweepstakes, gift cards, competitions or similar operations – in order to raise additional resources for their maintenance or costing. Based on this provision, several “non-profit” bingo halls are operating in the country, but according to SECAP’s understanding, these operations would need to have been previously approved by the Ministry of the Economy.
Casinos are prohibited in Brazil.
Caixa Econômica Federal runs the federal lottery and has a network of over 13,500 agencies. Caixa was granted control of the federal lottery as a result of Decree No 50,954/1961, which cancelled all lottery licences granted to the private sector. Before the Supreme Court ruling issued in September 2020 (ADPF 492, ADPF 493 and ADI 4,986), only the lotteries of the states of Rio de Janeiro, Minas Gerais, Ceará and Paraíba were operational. Now all the 26 states and the Federal District will be able to open and operate their own lotteries, offering the same lottery products authorised by the federal legislation, including fixed-odds sports betting and instant lottery, according to a leading vote issued by Supreme Court Justice Gilmar Mendes, the rapporteur of the case (at the time of writing, the final decision had not yet been published, and will be subject to petitions for clarifications, so this can be subject to change).
Poker has been recognised as a sport by the former Ministry of Sports, now the Secretariat of Sports. As a skill-based game, online poker is permitted, but there is no regulation in place. There has been some discussion as to whether only poker tournaments should be legal, or if ring games should also be authorised. Based on the civil law concept of betting, it is understood that ring games do not involve bets and are therefore also legal.
Gaming machines are prohibited in Brazil.
The general prohibition on gambling in Brazil is set forth in Article 50 of the Misdemeanours Law, which imposes imprisonment for three months to one year and a fine for those who establish or exploit games of chance in a public place or a place accessible to the public, by means of the payment of an entry fee or otherwise.
The federal lottery operated by Caixa Econômica Federal is regulated by several laws and decrees, mainly:
The instant lottery LOTEX was created by Law No 13,155/2015, was amended by Law No 13,756 of/2018, and is regulated by Decree No 9,327/2018.
Horse race betting is regulated by Law No 7,291/1984 and Decree No 96,993/1988.
Fixed-odds sports betting was legalised by Law No 13,756/2018 and included in the Program of Partnerships and Investments for privatisations by Decree No 10,467/2020.
In Brazil, gambling does not have a legal definition. As a matter of fact, the word “gambling” does not have a perfect translation into Portuguese. It can mean a bet or a game, involving a consideration, a prize and chance.
“Game” is a contract type that can be defined as a legal transaction whereby two or more people hold a particular promise (usually with pecuniary content) in favour of the person who achieves a favourable result in the performance of an act in which the parties participate.
Note that the game (and thus the success or failure of each party) necessarily depends on the performance of each party (called a “player”), either by their intelligence, skill, strength, or pure luck.
“Bet” is another contract type, defined as a legal transaction in which two or more people with different opinions on a certain event promise to perform a particular action (in general, with monetary content) to the benefit of the party whose opinion prevails. Hence, in the bet, there is no requirement for the active participation of any party (called a “bettor”) to influence the outcome of the event, but rather only the expression of their personal opinion.
The subtle difference between a “game” and a “bet” is that the result of a game will depend on the action of the parties, while the result of a bet depends on facts unrelated to the parties’ will. Such legal definitions have been construed by judicial precedent and are not expressly set forth by law, even though they are widely accepted and applied by the Brazilian courts.
Article 50 of the Misdemeanours Law establishes that the operation of games of chance in a public place or in a place available to the public is subject to imprisonment for between three months and one year, and a fine. “Games of chance” are defined as:
“Public place” includes:
Games of chance are treated as misdemeanours, which are recognised by law as offences punishable by minor penalties (Article 61 of Law No 9,099/1995). In other words, a misdemeanour is a lesser offensive crime when compared to a criminal violation of Brazilian law. The term “misdemeanour” is related to setting out “public morality”, which, according to Professor Humberto José da Nova, includes “safeguarding morality” in order to “prevent certain illegal and vicious acts, or defend certain moral sentiments regarded as indispensable to harmonious social coexistence, the effects of which are harmful to the interests of the collectivity”.
Contrary to this, “skill-based games” are those in which the results depend on the ability of the player more than on luck. It is the case with poker, for instance, and these games are legal in Brazil.
The Misdemeanours Law dates from 1941 and does not differentiate between online and land-based activities.
Decree No 9,327/2018, which regulates LOTEX, defines physical bets as those made by the client upon the purchase of a printed ticket and virtual bets as those made by the client via electronic channels.
Law No 13,756/2018, which introduced fixed-odds sports betting as a lottery modality, sets forth that it can be offered by both land-based and online operators.
See 3.3 Definition of Land-Based Gambling.
According to Article 50 of the Misdemeanours Law, a person is guilty of illegal betting if he or she establishes or explores games of chance, an offence punishable with imprisonment for between three months and a year, and a fine. Whoever is found taking part in a game of chance, even via the internet or any other means of communication, as a cashier or bettor, is subject to a fine that ranges from BRL2,000.00 to BRL200,000.00.
Currently, all prosecution cases related to Article 50 are suspended until the Brazilian Supreme Court judges Extraordinary Appeal No 966,177. The scope of that judgment will be to determine whether Article 50 of the Misdemeanours Law complies with the constitutional precepts concerning free enterprise and fundamental freedoms, as provided for in Articles 1, IV; 5, XLI; and 170 of the Federal Constitution.
An unlawful gambling operator can be penalised with imprisonment for between three months and a year, and a fine. Players and punters involved with unlawful gambling are subject to fines ranging between BRL2,000.00 and BRL200,000.00.
Since the general ban on games of chance was imposed in 1941 by the Misdemeanours Law, and reinforced by Decree-Law No 9,215/1946, several bills of law have been discussed in the Congress for the legalisation of gaming activities. Currently, they are appended to Bill of Law No 442/1991, at the Chamber of Deputies, and to Bill of Law No 186/2014, at the Senate.
These bills are ready to be presented on the floor of each house to be voted on at any time. Once a bill of law is approved on the floor of one of the houses of Congress, it will have to be approved by the other house. If amended, it will need further approval of any amendments by the house of origin prior to being presented and signed by the president.
Bill of Law No 442/1991
Bill of Law No 2,826/2008
Bill of Law No 4,062/2012
Bill of Law No 186/2014
The procedures and criteria for licensing are yet to be determined by future regulation.
Bill of Law No 2,903/2015
Bill of Law No 5,782/2016
Bill of Law No 213/2017
Bill of Law No 8,972/2017
Bill of Law No 9,192/2017
Bill of Law No 530/2019
Bill of Law No 2,648/2019
Bill of Law No 3,234/2019
Bill of Law No 5,319/2019
Bill of Law No 5,783/2019
Bill of Law No 585/2020
Bill of Law No 4,495/2020
SECAP is in charge of regulating lotteries, including the fixed-odds sports betting lottery modality, the regulation of which is currently being drafted.
The Ministry of Agriculture, Livestock and Food Supply is responsible for the regulation of horse race betting.
In general, Brazilian regulation tends to be prescriptive. Consumer protection rules, on the other hand, are more risk-based, with the operator being held liable for the negative effects on consumers, even if the prescriptive regulations have been complied with.
According to the latest public statements made by SECAP, it is likely to be a concession model with a limited number of licences to be sold in a public tender.
Horse Race Betting
The horse race betting licence issued by the Ministry of Agriculture, Livestock and Food Supply is called “Carta Patente”.
Poker does not require specific licences.
Fantasy sports do not require specific licences.
Social gaming does not require specific licences.
Licences are not yet available.
Horse Race Betting
Licenses can be obtained at the Ministry of Agriculture, Livestock and Food Supply.
There are no lottery licences available in Brazil, but several state lotteries are looking for service providers.
This is yet to be determined by BNDES.
Horse Race Betting
Horse race betting licences do not have an expiry date.
Application requirements are yet to be regulated.
Horse Race Betting
The applicant must:
Currently there are no lottery licences available in Brazil, but several state lotteries are looking for service providers. The duration of each contract with every state depends on the rules defined in the public procurement process.
No information has been provided in this jurisdiction.
No information has been provided in this jurisdiction.
No information has been provided in this jurisdiction.
Land-based gambling is restricted to federal and state lotteries, horse race betting at racetracks and agencies, poker rooms, and future LOTEX and sports betting points of sale.
Premises licensing varies according to the gambling modality.
Caixa’s lottery agencies are concessions granted by the federal government, and the premises licences are granted by Caixa.
Horse race entities must apply for their agents’ and agencies licences before the Ministry of Agriculture, Livestock and Food Supply. The horse race entity remains entirely responsible for any and all acts of the agent. The agent licence is granted to the agent (an individual or a legal entity) to facilitate wagering only at the specified venue.
The Brazilian Supreme Court's ruling from 30 September 2020, which ruled as unconstitutional the federal monopoly on lottery operations, will completely change the landscape of land-based gaming in the country. Every state now has the right to operate all the exact same lottery modalities created by the federal law and this will increase the offer of lottery products in the country. It will also create a variety of legal arguments between the states and the Union on how much room the states have to innovate and create attractive features in their local lotteries.
B2C licences are not yet available.
There are currently no regulations on B2B licences.
There are currently no regulations on affiliates in Brazil.
There are currently no regulations on white-label providers in Brazil.
The inclusion of sports betting in the Investment Partnership Program was formalised by Decree No 10,467/2020, designating BNDES as responsible for the execution and monitoring of the privatisation process and the Ministry of the Economy as co-ordinator of the procedures and stages of that process. SECAP remains in charge of the regulation of sports betting.
If LOTEX is taken as an example, there have been 15 months between the date BNDES hired independent experts (8 March 2017) and the first tender attempt (25 June 2018), which was a no-show. In this sense, and taking the COVID-19 pandemic into consideration, the authors believe it is very unlikely that we will see sports betting regulation issued in Brazil in 2020. The authors expect that BNDES is likely to start the concession process in 2020 and the tender for the licences will take place in 2021.
There are currently no technical measures in place in Brazil.
There are currently no responsible gambling requirements in force.
There are currently no gambling management tools defined in the regulation.
Law No 9,613/1998, as amended by Law No 12,683/2012, defines the AML legal framework in Brazil. Pursuant to Article 1, money laundering under Brazilian legislation is the act of hiding or disguising the nature, origin, location, disposition, remittance or ownership of property, goods, rights or values arising directly or indirectly from a criminal offence. This law created the Conselho de Controle de Atividades Financeiras (COAF), the regulatory body in charge of pursuing, investigating and sanctioning any activity related to money laundering crimes. COAF issues directives to regulate activities of industries that may facilitate money laundering, such as gambling.
Ministry of Finance Ruling GM/MF No 537/2013 establishes procedures to be adopted by entities that distribute money or goods through the operation of lotteries, for the purpose of preventing money laundering and the financing of terrorism. All prize-winners must be identified and all prizes recorded, including prize description, related amounts, handover dates, as well as the winners’ name, identification document and personal address.
For the purpose of preventing money laundering and the financing of terrorism, Ministry of Finance Ordinance GM/MF No 537/2013 establishes that entities that distribute money or goods through the operation of lotteries shall pay special attention to serious suspicions of crimes defined in Law No 9,613/1998, as amended, and communicate suspicious transactions to COAF, such as:
Regardless of analysis or any other consideration, the following operations or proposed operations must be communicated to COAF:
If the operator does not communicate any suspicious transaction to COAF during the calendar year, it must issue a negative certification to SECAP by January 31st of the following year, confirming there was no occurrence in the previous year.
Based on public statements made by SECAP for fixed-odds sports betting, players shall be identified by their taxpayer number (CPF) to play either online or at land-based shops. Operators of fixed-odds betting lotteries ought to disclose to the regulating authorities all data:
The regulator shall require unrestricted access, including in real-time, to the systems used to share such information. This is to be confirmed or changed after BNDES finishes the studies necessary for the definition of the economic model.
Decree No 57,690/1966 and Decree No 4,563/2002 regulate advertising in Brazil and, according to the latter, all advertisements in Brazil must comply with the rules set forth by the Standard Rules Executive Council (CENP). This council is responsible for regulating the commercial relations between advertisers and agencies, while the National Council for Advertising Self-Regulation (CONAR) is responsible for ensuring ethics in an advertising content.
Both CENP and CONAR are non-governmental organisations comprised of members of the advertising industry and define their own statutes and codes. CONAR’s Self-Regulation Code also includes a specific rule, according to which, advertisement contents must not “induce criminal or illegal activities”.
The legal definition of advertising is set forth by Article 2 of Decree No 57,690/1966 as any paid form of dissemination of ideas, merchandise, products or services by an identified advertiser.
Currently, the only criminal provision regarding gambling advertising is the prohibition to promote illegal lotteries, established by Article 51 of the Misdemeanours Law.
CONAR’s restrictions on gambling advertising have been based on the rule set forth by Article 21 of CONAR’s Self-Regulation Code, according to which, advertisement content must not induce criminal or illegal activities, or encourage, stimulate or incite such activities.
Since sports betting is no longer illegal, even before the issuance of the licences, international operators are advertising in Brazil and sponsoring soccer teams.
During the fixed-odds sports betting regulation process, it is expected that a new criminal provision will be established to penalise advertising of unlicensed operators.
No advertisement shall:
Article 50 of CONAR’s Self-Regulation Code states that violators of the rules established in that Code are subject to the following penalties:
There are currently no acquisitions or changes of control regulations in place for sports betting and horse race betting in Brazil.
There are currently no regulations in place for change of corporate control triggers.
There are currently no requirements for passive investors in acquisitions or changes of control.
Horse Race Betting
The Ministry of Agriculture, Livestock and Food Supply is the regulatory body in charge of regulating, monitoring and enforcing the regulation and penalties involving racetracks in Brazil.
SECAP is the regulatory body in charge of regulating, monitoring and enforcing the regulations and penalties for lotteries in Brazil, which includes the fixed-odds sports betting lottery modality, both land-based and online.
Regulation is still being drafted, and there is no history of enforcement yet. In the past, sanctions have been applied by the federal and state courts upon requests by public attorneys’ offices.
Regulation is still being drafted, and there is no history of enforcement yet.
About 70% of all Brazilians are mobile internet users, and, on average, Brazilians spend 4hr 45min each day on the internet on their mobile devices. This represents just over 50% of all the time they spend online every day. Brazil is the third-highest country in mobile internet usage in the world, behind Thailand and the Philippines. Online payment methods are becoming more and more accessible, and all these factors create a very attractive environment for the growth of social games. There is also no trend towards the regulation of social games in the near future.
Brazil has the third-largest esports fanbase in the world (China and USA are the largest), with 21.1 million, of which 9.1 million watch professional content more than once per month, and it is estimated that by the end of 2020 there will be almost 30 million Brazilians watching esports in some capacity.
Besides the live broadcast of esports via social media, several sports channels already have live esports events as recurring content in Brazil.
Fantasy sports are skill-based games and have become quite popular in the country. CartolaFC, the fantasy sports platform operated by TV Globo, the largest TV network in Brazil, has over 5 million free subscribers and more than 400,000 paying users (at BRL39.90 each), with revenues over BRL16 million, after it was granted an authorisation by SECAP to draw prizes.
Poker is a skill game that is legal in Brazil and, as such, it is not regulated. Some groups are lobbying for the regulation of skill-based games (“sports of the mind”) as a way to have more clarity on the applicable taxation on tournaments and ring games.
Four of Brazil’s financial supervisory authorities have come together to regulate emerging technologies, including blockchain. Several agencies under the Ministry of the Economy – namely the Central Bank of Brazil (BCB), the Securities Commission (CVM) and the Superintendence of Private Insurance (SUSEP) – announced in June 2019 their intention to adopt new regulations to manage fintech and cryptocurrency advances, with the creation of a regulatory sandbox framework for new fintech projects and companies.
In March 2020, SUSEP issued Resolution No 381/2020 implementing its sandbox rules, and in October 2020 approved the first batch of insurtech companies to operate under the new rules. Similarly, in May 2020 CVM issued Ruling No 626/2020, which is aimed at implementing the sandbox rules for companies in the securities industry. Finally, BCB edited its own set of rules for sandboxing on October 2020, in similar terms as the aforementioned sister agencies.
The Congress has been discussing the legalisation (and regulation) of gambling activities in Brazil since 2015. During the conversion of Provisional Measure No 671/2015 into Law No 13,155/2015, fixed-odds sports betting was approved by the Congress and vetoed by the former President Dilma Rousseff.
On 9 December 2015, the Commission of the Senate approved Bill of Law No 186/2014. After an appeal by some members of the Senate, Bill of Law No 186/2014 was sent to the Senate’s floor to be scheduled for a vote. Meanwhile, the Commission of the Deputies continued working on Bill of Law No 442/1991.
After extensive discussion, on 30 August 2016, the Commission of the Deputies approved the report on the new draft of Bill of Law No 442/1991, which was sent to the Chamber of Deputies’ floor to be scheduled for a vote.
On 14 December 2016, Bill of Law No 186/2014 was sent to the Constitution and Justice Commission of the Senate, where Senator Benedito de Lira introduced its new draft. The Bill of Law is currently ready to be presented to the floor for a vote, because Senator Ciro Nogueira requested and obtained its retrieval from the archive for this new legislature.
Both Bill of Law No 442/1991, from the Chamber of Deputies, and Bill of Law No 186/2014, from the Senate, may be presented to the floor of each house to be voted on at any time.
Since then, several bills have been introduced in both houses, as explained above. More recently, Senator Roberto Rocha introduced Bill of Law No 2,648/19 and Senator Irajá Silvestre introduced Bill of Law No 4,495/20, which is expected to be appended to the former. Both proposals aim to authorise the establishment of casinos in hotel resorts. The rapporteur at the Commission of Regional Development and Tourism, Senator Angelo Coronel, has already declared himself to be highly favourable to the legalisation of all gaming modalities, not only integrated resort casinos. It is expected that public hearings with experts will be held at the Senate Commission, and among the expected proposals to be discussed is the potential destination of levied taxes to a new social programme for low-income households or to redress the impacts of COVID-19 in the country.
All gambling companies in Brazil are subject to the levy of corporate income tax (IRPJ) and social contribution on net profit (CSLL) at a combined general rate of 34%. The IRPJ rate is 15%, and a 10% surcharge applies to taxable income exceeding BRL240,000.00 per year. CSLL is due at a rate of 9%.
The effective tax rate may vary according to the system elected by the Brazilian legal entity to calculate IRPJ and CSLL (actual profit system or deemed profit system). Companies with total revenues greater than BRL78 million in the previous year are automatically subject to the actual profit system.
Besides the ordinary corporate taxes, gambling companies’ activities are also subject to the following taxes.
Instant Lottery – LOTEX
Taxation on the operator
The LOTEX operator’s gross revenue is 18.3% of the total sales. This is the tax basis for PIS (1.65%), COFINS (7.6%) and Municipal Service Tax (ISS) (2% to 5%).
Taxation on players’ winnings
Lottery cash prizes that exceed the value of the first tier of the Individual Income Tax monthly rate table (BRL1,903.98) are subject to income tax withholding at a rate of 30%, as set forth in Article 732, I, of Decree No 9,580 of 22 November 2018 and Article 56 of Law No 11,941 of 27 May 2009.
Prizes in goods and services are subject to income tax withholding at a rate of 20%, as set forth in Article 733 of Decree No 9,580 of 22 November 2018.
Horse Race Betting
Taxation on horsemen’s winnings
Prizes paid to horsemen, breeders and jockeys are subject to income tax withholding at a rate of 15%, as set forth in Article 737 of Decree No 9,580 of 22 November 2018.
Taxation on players’ winnings
Bettors’ prizes are subject to income tax withholding at a rate of 30%, as set forth in Article 732, II, of Decree No 9,580 of 22 November 2018.
Taxation on the operator
Law No 13,756 of 12 December 2018 established that 3% of the total online handle/turnover and 6% of the total land-based handle/turnover must be paid to public funds, social security and sports entities.
After the first public consultation held by SECAP in July 2019, it became clear for the regulator that those tax burdens were excessive. As result, the draft decree published by SECAP during the second and third public consultations proposed a different tax structure, with a flat rate of 1% on handle/turnover for both land-based and online operations. This proposal was abandoned by the regulator and now the current discussions involve a 10% tax on GGR, which will total a tax burden of from 21.25% to 24.25% on GGR when added to PIS (1.65%), COFINS (7.6%) and ISS (2% to 5%).
Taxation on players’ winnings
Fixed-odds sports betting lottery cash prizes that exceed the value of the first tier of the Individual Income Tax monthly rate table (BRL1,903.98) are subject to income tax withholding at a rate of 30%, as set forth in Article 732, I, of Decree No 9,580 of 22 November 2018 and Article 56 of Law No 11,941 of 27 May 2009.
Taxation on the operator
Taxation on players’ winnings
According to the Brazilian Revenue Service, when the prize depends on the performance of the participants, it is deemed as remuneration for the work, regardless of whether the prizes are paid in cash or in the form of goods and services. Therefore, if the prize is paid by a Brazilian legal entity to an individual fiscally resident in Brazil, it will be subject to personal income tax withholding calculated based on the following progressive tax rates (in Brazilian reais):