Gaming Law 2019

Last Updated November 25, 2019

Brazil

Law and Practice

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FYMSA Advogados is a business law firm internationally recognised for its expertise and practice in gaming law and technology, whose purpose is to serve with efficiency, commitment and adaptability. The firm values long-term relationships with its customers based on their needs, trust and mutual knowledge. FYMSA's purpose is not simply to be lawyers or consultants, but to facilitate, enable and promote business and solutions, with a focus on certainty and agility, with ethical and sustainable results. The firm is dedicated to enhancing clients' results. The team is formed by a group of lawyers with experience as former partners at prestigious law firms and in the legal departments of large companies and knowledge in various corporate areas.

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 211 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 is not a legal definition. Instead, Decree-Law No 3,688/1941 (“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”: (i) a game in which the winnings and the losses depend exclusively or mainly on chance, (ii) bets on horse racing outside a racetrack or where they are authorised and (iii) bets on any other sporting competition.

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 Congress comprising integrated resort casinos, bingos, online gaming and lotteries. They are attached to the Bill of Law 442/1991, at the Chamber of Deputies, and to the Bill of Law 186/2014, at the Senate.

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 of 4 August 2015. On 22 October 2019, a consortium formed by IGT and Scientific Games made the only offer in the public bid for the concession of LOTEX and earned the right to operate the instant lottery as a monopoly in the entire Brazilian territory for the next 15 years. Turnover from physical and virtual tickets sales will be split in three: (i) 65% for payout; (ii) 18.3% for the concessionaire; and (iii) 16.7% for Federal Funds, Social Security and soccer clubs.

In December 2018, Law No 13,756 created the fixed-odds sports betting lottery modality, granting powers for the Ministry of Economics to regulate it and issue the respective licences. According to the law, the Ministry of Economics has up to four years to complete the regulation.

The Secretariat for Public Policy Evaluation, Planning, Energy and Lottery (SECAP), which is under the Ministry of Economics, is in charge of regulating sports betting and has already issued two public consultations on the matter. The first consultation, published in July 2019, was comprised of seven general questions about regulation and received over 1,600 contributions, and the second, issued in September 2019, contained a draft of the decree with the regulation and received over 2,800 contributions. In this guide, we will address the sports betting issues according to the draft regulations published by SECAP, as well as the regulators’ public statements during the public consultation process.

It is expected that the regulators will amend Law No 13,756/2018 to adjust taxation rates and their basis. This process may impact the time before sports betting licences become available.

Finally, it is worth noting a court decision in the state of Rio Grande do Sul, in the south of Brazil, that decided that gambling is not prohibited because the prohibition set out in Article 50 of the Misdemeanour Act of 1941 would be unconstitutional. The public attorney has appealed against that decision, and the case is now pending judgment by the Federal Supreme Court, where it has been granted "general repercussion" effects, which means that the decision of this case will be binding on all other similar cases in the country.

Sports Betting

Online fixed-odds sports betting was legalised in December 2018 by Law No 13,756/2018, and the Ministry of Economics is currently working on the regulation, which is not expected to be issued until 2020. Pari-mutuel betting and head-to-head betting on sports events are prohibited.

Horse Racing 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.

Bingo

Online bingo is prohibited in Brazil.

Casinos

Online casinos are prohibited in Brazil

Lotteries

Caixa Econômica Federal 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. With the privatisation of the instant lottery LOTEX in October 2019, the first private lottery operation in Brazil will start, and the consortium created by IGT and Scientific Games will be able to offer virtual instant lotteries online as well as at self-service terminals.

Poker

Poker has been recognised as a sport by the Ministry of Sports. As a skill-based game, online poker is permitted, but there is no regulation in place. There has been some discussion on 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

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

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 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 of 4 September 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 operator’s jurisdiction’s law, being out of the scope of the Misdemeanours Law.

Sports Betting

Land-based fixed-odds sports betting was legalised in December 2018 by Law No 13,756/2018, and the Ministry of Economics is currently working on the regulation, which is not expected to be issued until 2020. Pari-mutuel betting and head-to-head betting on sports events are prohibited.

Horse Racing 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.

Bingo

Commercial bingos are prohibited in Brazil. In 2015, Law No 13,019 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, these operations would need to have been previously approved by the Ministry of Economics.

Casino

Casinos are prohibited in Brazil.

Lotteries

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 of 14 July 1961, which cancelled all lottery licences granted to the private sector. In addition to Caixa, only the states that had their own lotteries running when Decree-Law No 204 of 27 February 1967 was enacted are authorised to run their own lotteries. These lotteries are:

  • Loteria de Paraíba – Lotep;
  • Loteria de Rondonia – Lotoro;
  • Loteria de Ceará – Lotece;
  • Loteria do Pará – Loterpa;
  • Loteria de Rio de Janeiro – Loterj;
  • Loteria do Rio Grande do Sul – Lotergs;
  • Loteria de São Paulo;
  • Loteria Social de Alagoas;
  • Serviço de Loteria do Estado do Paraná – Serlopar;
  • Loteria de Minas Gerais – Loteria Mineira;
  • Loteria do Estado do Distrito Federal;
  • Loteria do Estado do Mato Grosso do Sul;
  • Loteria do Estado do Pernambuco;
  • Loteria do Estado do Piaui;
  • Loteria do Estado de Goiás; and
  • Loteria do Estado do Mato Grosso – Lemat.

Of all these state lotteries, only those from the states of Rio de Janeiro, Minas Gerais, Ceará and Paraíba are currently operational.

With the privatisation of the instant lottery LOTEX in October 2019, the first private lottery operation in Brazil will start next year, and the consortium created by IGT and Scientific Games will be able to offer instant lottery tickets at many different points of sale.

Poker

Poker has been recognised as a sport by the Ministry of Sports. As a skill-based game, online poker is permitted, but there is no regulation in place. There has been some discussion on 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, therefore, also being legal.

Gaming Machines

Gaming machines are prohibited in Brazil.

The general prohibition of 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:

  • Decree-Law No 6,259, of 10 February 1944 – provides for the lottery service, and other measures;
  • Decree-Law No 204, of 27 February 1967 – provides for the operation of lotteries and other arrangements;
  • Federal Law No 6,717, of 12 November 1979 – authorises modality of the federal lottery governed by Decree-Law No 204, of 27 February 1967, and other measures;
  • Federal Law No 11,345, of 14 September 2006 – provides for the establishment of a lottery modality for the development of sports practice, the participation of soccer sports entities in this contest and the instalment of tax debts, amends Federal Laws Nos 8,212 of 24 July 1991, and 10,522 of 19 July 2002 (and other provisions); and
  • Decree No 6,187, of 14 August 2007 – regulates Federal Law No 11,345, of 14 September 2006 and establishes the lottery modality called Timemania.

The instant lottery LOTEX was created by Law No 13,155/2015, amended by Law No 13,756/2018, and regulated by Decree No 9,327/2018.

Horse racing betting is regulated by Law No 7,291/1984 and Decree No 96,993/1988.

Fixed-odds sports betting was legalised by Law 13,756/2018 and is currently under regulation by the Secretariat for Public Policy Evaluation, Planning, Energy and Lottery.

In Brazil, gambling is not 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 game, involving consideration, 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. It is important to highlight that these definitions have been created by jurisprudence and are not expressly set forth by law, although 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 three months and up to one year, and a fine. It defines "games of chance" as:

  • a game in which winning or losing depends exclusively or principally on chance;
  • bets on horse races outside the racetrack or other authorised venues; and
  • bets on any other sporting competition.

"Public place" is defined as:

  • a private house in which games of chance are held, when those who usually take part are not members of the family that live at the house;
  • a hotel or collective residence where the guests or residents are offered games of chance;
  • the headquarters or premises of a company or association where games of chance are held; and
  • an establishment intended for the operation of games of chance, even if its purpose is disguised.

Games of chance are treated as misdemeanours, which are recognised by law as offences punishable by minor penalties (Article 61 of Law No 9,099/95). In other words, a misdemeanour is a less offensive crime when compared to a criminal violation of Brazilian law. The purpose of using the term "misdemeanour" is to implement the "moral police", 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 whose 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 the instant lottery LOTEX, defines physical bets as those made by the client upon the purchase of a printed ticket.

Law No 13,756/2018, which created the fixed-odds sports betting lottery modality, sets forth that it can be offered by both land-based and online operators.

The Misdemeanours Law dates from 1941 and does not differentiate between online and land-based activities.

Decree No 9,327/2018, which regulates the instant lottery LOTEX, defines virtual bets as those made by the client via electronic channels.

Law No 13,756/2018, which created the fixed-odds sports betting lottery modality, sets forth that it can be offered by both land-based and online operators.

According to Article 50 of the Misdemeanours Law, to establish or to explore games of chance is punishable with imprisonment for three months to one year and a fine. Whoever is found participating 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.

It is important to highlight that all lawsuits relating to Article 50 are suspended until the Federal Supreme Court judges the Extraordinary Appeal (RE) 966177. 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, item IV; 5, item XLI; and 170 of the Federal Constitution.

An unlawful gambling operator can be penalised with imprisonment for three months to one year and a fine. Players and punters involved with unlawful gambling are subject to a fine that ranges from BRL2,000.00 to BRL200,000.00.

Since the general ban on games of chance in 1941, several bills of law have been discussed in Congress for the legalisation of gaming activities. Currently, they are attached to the Bill of Law 442/1991, at the Chamber of Deputies, and to the Bill of Law 186/2014, at the Senate.

These bills are ready to be presented in the plenary 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, it will have to be approved by the other house. If amended, it will need approval by the house of origin before being subject to the President’s sanction.

Bill of Law 442/1991

  • Origin: Chamber of Deputies.
  • Status: Approved by the Special Commission.
  • Next steps: voting in the plenary of the Chamber to be scheduled.
  • Modalities: casinos, bingos, fixed-odds sports betting, video lottery terminals (VLTs), online gaming, lotteries, Jogo do Bicho.
  • Licences:
    1. casinos – public bid for concession; 30-year term, renewable for equal terms;
    2. bingos – authorisation for 20 years, renewable for one equal term;
    3. Jogo do bicho – BRL5 million minimum paid-up capital; unlimited time licence;
    4. lotteries – states may have bids for a concession of lottery services with a 20-year term;
    5. online gaming – not defined; and
    6. VLTs – BRL20 million minimum paid-up capital. Type of licence not defined.

Bill of Law 186/2014

  • Origin: Senate.
  • Status: draft proposed by the rapporteur, Senator Benedito de Lira, was rejected by the Justice and Constitution Commission.
  • Next steps: voting in the plenary of the Senate to be scheduled.
  • Modalities: Jogo do Bicho; video-bingo (Class II machines) and video-jogo (VLTs), both land-based and online; bingos; casino resorts; sports betting and other non-sports related types of betting, both land-based and online; online casino games.
  • Licences:
    1. all gaming modalities must be approved by the federal government;
    2. casinos, sports betting and online games are licensed by the federal government;
    3. bingos are licensed by the states and the Federal District; and
    4. Jogo do Bicho and VLTs are licensed by the municipalities.

The procedures and criteria for licensing are yet to be determined by future regulation.

The Secretariat for Public Policy Evaluation, Planning, Energy and Lottery is the authority in charge of regulating the lotteries, including the fixed-odds sports betting lottery modality, which regulation 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.

Sports Betting

After SECAP concludes the regulation for the fixed-odds sports betting lottery modality, an unlimited number of companies that comply with the requirements set forth by the applicable regulations will be entitled to apply for authorisation.

Horse Racing Betting

An application for a horse racing betting licence should be made before the Ministry of Agriculture, Livestock and Food Supply. The applicant must be a non-profit entity legally incorporated in Brazil, in ownership of a racetrack, and they also need to demonstrate the technical and economic viability of the weekly racing schedule and the floor plan of the race field. That entity must present the draft of a general betting plan (which includes the rules applicable for each game to be run by the operator, such as prize, ticket value, minimum and maximum betting amounts, and payout).

Horse racing entities must also apply for their agents’ licences before the Ministry of Agriculture, Livestock and Food Supply. This application must be made by the authorised horse race entity, which must be entirely responsible for any and all acts of the agent. The agent licence is granted to the agent (person or company) to facilitate wagering only at the specified venue. Horse racing personnel and suppliers do not need to apply for licences and are not regulated.

Both authorisations, for the horse racing entities and their agents, are valid without any time limitation. Revocation may occur when there is a non-observance of rules and procedures after the due administrative process.

Bingo

Commercial operation of bingo is prohibited in Brazil. Civil society organisations may request authorisation from SECAP 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.

Casino

Online and land-based casinos are prohibited in Brazil.

Lotteries

The instant lottery LOTEX is the only privately operated lottery in Brazil, under a concession granted to the consortium created by IGT and Scientific Games. All other lotteries are operated by the states or by Caixa Econômica Federal, at the federal level.

Poker

Poker is not regulated. There is no specific required licence for its operation besides the ordinary working permits and licences applicable to all businesses in Brazil.

Fantasy Sports

Fantasy sports are not regulated in Brazil. There is no specific required licence for its operation besides the ordinary working permits and licences applicable to all businesses in Brazil.

Social Gaming

Social gaming is not regulated in Brazil. There is no specific required licence for its operation besides the ordinary working permits and licences applicable to all businesses in Brazil.

Licences are not yet available. Fixed-odds sports betting licences will only be available after SECAP concludes the regulation.

Fixed-odds sports betting licences are expected to be valid for nine years according to the draft regulation already published by SECAP.

The instant lottery LOTEX concession is valid for 15 years.

According to the draft regulation already published by SECAP, only a legal entity regularly incorporated in accordance with Brazilian law, with headquarters and administration in the country, may be authorised to operate the fixed-odds betting lottery. Applicants must present the following.

  • Criminal, administrative, civil and financial clearance certificates.
  • A certificate of fiscal regularity, according to rules issued by the Ministry of Economics.
  • A statement that they have never operated illegally in regulated lottery markets and other betting systems with prizes, according to rules issued by the Ministry of Economics.
  • Proper documentation, according to the norms issued by the Ministry of Economics, to prove the absence of conviction in a final and unappealable court decision, or handed down by a judicial plenary body, from the conviction until the end of the period of eight years after serving the sentence for the following crimes:
    1. against life, personal dignity, popular economy, public faith, public administration, public or private patrimony, tax order, financial system, stock market, environment and public health;
    2. established in the law that regulates bankruptcy;
    3. electoral, to which the law imposes a custodial sentence;
    4. abuse of authority, in cases where there is a condemnation of loss of public office or disqualification from public function;
    5. laundering or concealment of assets, rights and financial values;
    6. drug trafficking and related drugs, racism, torture, terrorism and heinous crimes;
    7. labour conditions analogous to that of a slave; or
    8. criminal association.

These requirements are applicable to the applicant company, its shareholders, directors, managers, administrators, attorneys-in-fact and technology providers or suppliers, in accordance with regulations yet to be issued by the Ministry of Economics.

It is still unclear what the timescale will be for fixed-odds sports betting licence applications.

According to the draft regulation already published by SECAP, but still subject to changes, the application fee will be BRL3,000,000.00 and applicants must also have financial reserves of at least BRL18,000,000.00, which will serve as a guarantee of the capacity to pay prizes for winning bets.

Sports Betting

According to the draft regulation made public by SECAP, but still subject to changes, operators will have to pay, on a monthly basis:

  • BRL20,000.00 for land-based sports betting operators;
  • BRL30,000.00 for online sports betting operators; or
  • BRL45,000.00 for those operating land-based and online betting simultaneously.

Horse Racing Betting

Authorised racetracks have to pay a monthly contribution to the Comissão Coordenadora da Criação do Cavalo Nacional (the National Horse Breeding Co-ordinating Committee, or CCCCN) based on the total bets accepted in the previous calendar month. The rates are established on a progressive accumulative scale and will vary depending on a Reference Value (RF) published by the CCCCN. The contribution rate scale is the following:

  • total bets between 1 and 2,500 RF will be exempted;
  • total bets between 2,501 and 3,500 RF will be taxed with a 0.5% rate;
  • total bets between 3,501 and 4,000 RF will be taxed with a 1% rate; and
  • total bets over 4,001 RF will be taxed with a 1.5% rate.

Land-based gambling is restricted to federal and state lotteries, LOTEX points of sale, horse racing betting at racetracks and agencies, poker rooms and, soon, 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.

The LOTEX concession, recently granted for a 15-year period to the consortium formed by IGT and Scientific Games, will change the landscape for land-based gambling. It will create thousands of points of sale for physical and virtual instant lotteries. Under the LOTEX concession, it will be possible to operate self-service instant lottery terminals in the entire national territory.

SECAP is in the process of concluding the regulation of fixed-odds sports betting, and land-based operation is expected to commence in the second semester of 2020.

B2C licences are not yet available.

According to the draft regulation already published by SECAP, hardware and software will need to be certified by accredited institutions. Suppliers will also be subject to the same key application requirements valid for the operator's directors.

There are currently no regulations on affiliates in Brazil.

There are currently no regulations on white-label providers in Brazil.

Based on the draft regulations made public by SECAP, white-label providers will have to comply with the same key requirements applicable to the operator’s directors, and the software will need to be certified by an institution accredited by the regulator.

The online sports betting market as well as the beginning of LOTEX online operations, both expected for 2020, will be the milestone defining the opening of the Brazilian online gambling market. This also creates political pressure to deal with the regulation of online casino games.

There are currently no technical measures in place in Brazil.

There are currently no technical measures in place in Brazil.

There are currently no responsible gambling requirements in force.

Law 9,613/1998 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.

COAF Resolution 3 applies to any entities that, directly or indirectly, carry out the distribution of any kind of assets (including cash, real estate and goods), by means of lotteries or similar methods. Those entities must identify all prize-winners and keep a register of all prizes of more than BRL10,000. The register must include the prize description, its value and the date that it was handed over. This register must include the prize-winner's name, an identification document and the winner's address.

According to COAF Resolution No 3, lottery operators must identify all prize-winners and maintain updated records of any delivery and/or payment of prizes with values equal to or higher than BRL10,000.00. The records must contain information on prize types, the description of the assets, their values, the dates of delivery and/or payment, and, at a minimum, the name, ID number and Individual Taxpayer Number (CPF). The operators shall pay special attention to the following situations that may represent serious indications of or be related to the crimes defined in Law No 9613/1998, as set forth in the Annex to this Resolution:

  • a sudden and continued increase in the collection of a certain product, in a particular location or establishment (especially products with a higher probability of winning), followed by an increase in the frequency of prizes for the same location or establishment;
  • payments of three or more prizes in values equal to or higher than 800 UFIR (Brazilian Tax Unit Reference) to the same CPF holder within 12 months;
  • a sudden increase of high-value bets in one particular type of game, with the possibility of covering a significant proportion of the winning combinations; and
  • other prize distributions that due to the features concerning the parties involved, values, forms of execution and types of instruments used may indicate or be related to the crimes defined in Law No 9613, of 3 March 1998.

COAF Resolution No 5 applied to entities operating bingos and similar activities when bingos were legal in Brazil. Those entities were obliged to identify all prize-winners and maintain updated records of any delivery and/or payment of prizes with values equal to or higher than BRL2,000.00, as well as to report any of the following suspicious activities:

  • a player bets an amount disproportionate to the prize expectation;
  • a monthly accumulation of prizes by the same winner, in more than one drawing, of more than BRL5,000.00;
  • a quarterly accumulation of prizes by the same winner, in more than one drawing, of more than BRL10,000.00;
  • an annual accumulation of prizes by the same winner, in more than one drawing, of more than BRL30,000.00;
  • the payment of prizes of values higher than the amounts collected;
  • situations in which the winner is connected, at the same time, to the sporting entity and to the entity’s administrator and/or operator; and
  • other activities that, due to the features concerning the parties involved, amounts, forms of execution, types of instruments used, or the lack of economic or legal grounds, may indicate or be related to the crimes defined in Law No 9613, of 3 March 1998.

Based on the draft regulations made public by SECAP for fixed-odds sports betting, all players will have to be identified by their Individual Taxpayer Number to play either online or at land-based shops. The operators of the fixed-odds betting lottery will also have to make available to the regulator information:

  • collected, held, obtained or produced by an association, entity, body or organisation operating internationally that consolidates inputs for the analysis, prohibition, detection, inhibition or prevention of irregularities in the operation of lotteries and for the payouts or suspicious activities that may compromise the integrity of a sports event;
  • related to the certification of physical equipment (hardware) and computer programs (software) used by the operator; and
  • concerning the validation of each bet attracted by the operator;

The regulator expects unrestricted access, including in real-time, to the systems used to share such information.

Decree Law No 57,690/1966 and Decree Law 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 advertising content.

Both CENP and CONAR are non-governmental organisations formed by members of the advertising industry to define their own statutes and codes. CONAR’s Self-Regulation Code also includes a specific rule that advertisements should not contain anything that would “induce criminal or illegal activities”.

The legal definition of advertising is set forth by Article 2 of Decree-Law 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, which states that advertisement shall contain nothing that may induce criminal or illegal activities, or that may encourage, stimulate or incite such activities.

Now that 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 created to penalise advertising of unlicensed operators.

According to the draft regulation already published by SECAP, the advertising of a fixed-odds betting lottery shall be based on social responsibility and the promotion of responsible gambling awareness, aiming at collective security and the fight against illegal betting. The advertising shall contain express warning clauses and cannot use or target minors.

Article 50 of CONAR’s Self-Regulation Code states that violators of the rules established in that Code are subject to the following penalties:

  • a warning;
  • a recommendation to modify or correct the advertisement;
  • a recommendation to the media to suspend the broadcasting of the advertisement; and
  • disclosure to the media of CONAR’s position as regards the advertiser, the agency and the medium for non-compliance with the steps and measures determined by the entity.

There are currently no acquisitions and changes of control regulations in place for sports betting and horse race betting in Brazil.

For the instant lottery LOTEX, the transfer of the concession or the corporate control of the concessionaire is conditional on the prior authorisation of the granting power, under penalty of expiry of the concession. With regards to the concessionaire’s shareholder who provided the certificate of technical qualification related to instant lottery operation, it is already established that any change of its shareholding to less than 15% is also conditional on the granting power’s prior authorisation. The lack of observation may also result in the declaration of the concession’s caducity. For other cases of corporate change, the concessionaire shall inform the granting power within five business days after the conclusion of the change.

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 Racing 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.

Sports Betting

The Secretariat for Public Policy Evaluation, Planning, Energy and Lottery 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 request of 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 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 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, with 7.6 million people watching professional content more than once per month, and it is estimated that by 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 eSports live events as recurring content in Brazil.

In light of the above, the Brazilian National Congress has been demonstrating its intention to regulate eSports operations, which can be seen by Bill of Law 383/2017 from the Senate. Such Bill of Law intends to recognise eSports as a sports modality. This recognition will impact the possibility of fixed-odds sports betting operators accepting bets on eSports events.

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 three million subscribers and was granted 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 major financial authorities have come together to regulate emerging technologies, including blockchain. The Ministry of Finance, the Central Bank of Brazil, the Securities Commission and the Superintendent of Private Insurance announced on 13 June 2019 their intention to adopt new regulations to manage fintech and cryptocurrency advances, with the creation of a regulatory sandbox in the hope of understanding and allowing concessions for new fintech ideas. This regulatory sandbox is expected to launch at the end of 2019.

The Brazilian 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 13.155, of 4 August 2015, fixed-odds sports betting was approved by the Congress and vetoed by the former President Dilma Roussef under the justification that “the creation of the fixed-odds lottery demands a broader regulation to assure better economic and legal security and adequate levels of fraud and money evasion control. Besides, the law didn’t contain any responsible gaming measures.”

After vetoing the article that was meant to create fixed-odds sports betting, on 14 September 2015, the former President held a meeting with congressional leaders to assess the feasibility of getting gaming offering approved by both houses. Subsequently, the President of the Senate introduced Bill of Law 186/14 from the Senate in the Special Commission for National Development ("Commission of the Senate”). A few days later, another special commission (“Commission of the Deputies”) was created in the Chamber of Deputies to draft the Brazilian Gaming Regulatory Framework, based on another project, the Bill of Law 442/1991.

On 9 December 2015, the Commission of the Senate approved Bill of Law 186/2014. After an appeal by some members of the Senate, Bill 186/2014 was sent to the Senate's plenary to be scheduled for the vote. Meanwhile, the Commission of the Deputies continued working on Bill 442/1991.

After extensive discussion, on 30 August 2016, the Commission of the Deputies approved the report on the new draft of Bill 442/1991, which was sent to the Chamber of Deputies' plenary to be scheduled for the vote. Also in August, the Bill of Law 186/2014 returned from the plenary to the Commission of the Senate and its draft was replaced by a new one, presented by Senator Fernando Bezerra, its new rapporteur, who presented several versions of the draft, the latest from 4 November 2016.

On November 9th, the Commission of the Senate finally approved the Bill of Law 186/2014, and on December 14th a request from Senator Magno Malta was granted and the Bill of Law was sent to the Constitution and Justice Commission of the Senate, where Senator Benedito de Lira introduced a new draft of Bill 186/2014, which was rejected. Despite such defeat, the Bill is currently ready to be presented at the plenary for vote, because Senator Ciro Nogueira requested and obtained its retrieval from the archive for this new legislature.

Both Bill 442/1991, from the Chamber of Deputies, and Bill 186/2014, from the Senate, may be presented in the plenary of each house to be voted on at any time. Once a bill of law is approved in the floor of one of the houses, it will have to be approved by the other house. If amended, it will need approval by the house of origin before being subject to the President’s sanction.

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 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 higher than BRL78 million in the previous year are automatically subject to the actual profit system.

  • Actual profit system: the tax basis is determined based on the accounting net profit, adjusted in accordance with the addition of non-deductible expenses and the exclusion of certain amounts. Programme of Social Integration (PIS) and Contribution for the Financing of Social Security (COFINS) are taxed under the non-cumulative method, at the rates of 1.65% and 7.6% respectively, allowing credits from acquisitions.
  • Deemed profit system: the tax basis for services is 32% on the company’s gross revenues, on an accrual or cash basis. PIS and COFINS are taxed under the cumulative method, at the rates of 0.65% and 3% respectively, not allowing credits.

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 9,580/2018 and Article 56 of Law No 11,941/2009:

Prizes in goods and services are subject to income tax withholding at a rate of 20%, as set forth in Article 733 of Decree 9,580/2018.

Horse Racing 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 9,580/2018.

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 9,580/2018.

Sports Betting

Taxation on the operator

Law No 13,756/2018 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 public consultation held by the Secretariat for Public Policy Evaluation, Planning, Energy and Lottery 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 public consultation proposed a different tax structure, with a flat rate of 1% on handle/turnover for both land-based and online operations.

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 9,580/2018 and Article 56 of Law 11.941/2009.

Poker

Taxation on the operator

  • Tournaments: operator’s gross revenue is the total of the tournament's entry fees minus the amount separated for the prize pool. This is the tax basis for PIS (0.65% or 1.65%), COFINS (3% or 7.6%) and ISS (2% to 5%).
  • Ring games: operator’s gross revenue is the rake collected in each hand. This is the tax basis for PIS (0.65% or 1.65%), COFINS (3% or 7.6%) and ISS (2% to 5%).

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 of 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):

  • from BRL0.00 up to BRL1,903.98 – Income Tax Exemption – No deductible amount;
  • from BRL1,903.99 up to BRL2,826.65 – 7.5% Withholding Tax – BRL142.80 deductible;
  • from BRL2,826.66 up to BRL3,751.05 – 15% Withholding Tax – BRL354.80 deductible;
  • from BRL3,751.06 up to BRL4,664.68 – 22.5% Withholding Tax – BRL636.13 deductible; and
  • from BRL4,664.69 and above – 27.5% Withholding Tax – BRL869.36 deductible.
FYMSA Advogados

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sl. 1102 São Paulo
Brasil
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+55 11 2157 5025

+55 11 2157 5025

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FYMSA Advogados is a business law firm internationally recognised for its expertise and practice in gaming law and technology, whose purpose is to serve with efficiency, commitment and adaptability. The firm values long-term relationships with its customers based on their needs, trust and mutual knowledge. FYMSA's purpose is not simply to be lawyers or consultants, but to facilitate, enable and promote business and solutions, with a focus on certainty and agility, with ethical and sustainable results. The firm is dedicated to enhancing clients' results. The team is formed by a group of lawyers with experience as former partners at prestigious law firms and in the legal departments of large companies and knowledge in various corporate areas.

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