BRAZIL: Chamber Approves Bill Regulating Sports Betting

Some key highlights include:

-Change in revenue distribution: Instead of allocating 10% of the revenue to social security, the sector will receive 2%. Other beneficiaries include education (1.82%), sports (6.63%), and tourism (5%).

-Licensing fees: Licenses to operate sports betting will be costly, with a maximum payment of R$30 million per authorization.

-Virtual events: Exploration of virtual online gaming events is allowed, but betting on fantasy sports based on avatars of real people is prohibited.

-Requirements: Only Brazilian companies headquartered in the country can apply for authorization to operate bets. Requirements such as minimum share capital and cybersecurity measures are established.

-Prevention of illegal activities: Measures are implemented to prevent money laundering and result manipulation in bets.

-Advertising: Restrictions on betting advertisements are set, prohibiting misleading claims and the use of celebrities for promotion.

-Bettor protection: Bettor rights are guaranteed, and minors and individuals associated with sports events are prohibited from placing bets.

-Betting integrity: The adoption of security and integrity mechanisms in sports betting is mandated.

-Payments: Only institutions authorized by the Central Bank can process transactions related to bets, and bettors' funds are considered separate assets.

-Unclaimed prizes: The project allocates 50% of unclaimed prizes to the National Fund for Public Calamities and the other 50% to the Student Financing Fund (Fies).

The project will be sent to the Senate for consideration.



OFFICIAL PRESS RELEASE:

The approved text is a substitute presented by Congressman Adolfo Viana (PSDB-BA) for Bill 3626/23, submitted by the Executive Branch. Instead of 10% of the revenue going to social security, as stipulated by the provisional measure, the sector will receive 2%. Other recipients of the funds will be education (1.82%), sports (6.63%), and tourism (5%).

Law 13.756/18, which created this type of lottery, stipulated that companies would retain 95% of the gross revenue (after prizes and income tax), while the bill allows for 82%.

To compensate clubs and athletes for the use of their names, brands, and other symbols, betting companies will have to pay them a counterpart within the 6.63%. Thus, of this total, 1.13 percentage points will be distributed to them in the form of regulations.

With the approval in the Plenary of an amendment presented by Congressman Hugo Motta (Republicanos-PB), 0.5% of the amount will be directed to state sports departments, which will have to distribute half to municipal sports departments proportionally to the city's population.

Within the education budget, 0.82% will go to infant education schools or primary and secondary schools that have achieved goals in national assessments. The rest (1%) will go to public technical schools at the secondary level.

In tourism, 1% will go to Embratur, and 4% will remain with the Ministry of Tourism. "Online gaming currently occurs throughout the national territory, and the bill regulates the activity so that it can be taxed," noted the rapporteur.


Licensing

Regarding licensing, it will be onerous, with a maximum payment of R$30 million for authorization, to be granted to those who meet the requirements. The amount allows for the use of an electronic channel (a betting app) by authorization act and must be paid within 30 days from the authorization act.

This authorization may, at the discretion of the Ministry of Finance, be for up to three years, will have a personal, non-negotiable, and non-transferable character. If the authorized legal entity undergoes a merger or change in ownership control, the authorization may be reviewed through a specific administrative process, ensuring the right to due process and a full defense.


Virtual Event

Another novelty compared to the provisional measure is the possibility of exploring virtual online gaming events, where the outcome is determined by the outcome of a random future event.

However, the text explicitly states that activities or services related to so-called fantasy sports, where virtual disputes occur based on avatars of real people, cannot be subject to bets.

This applies to interactive games with prizes that do not depend on the number of participants or the amount collected from registration fees.


Requirements

Contrary to what the government proposed in Provisional Measure 1182/23, only companies constituted under Brazilian law, with headquarters and management in the national territory, may apply for authorization, excluding foreign companies.

The regulations will define conditions such as:


Minimum share capital;
At least one member with proven knowledge and experience in games, betting, or lotteries;
Structure and operation of customer service for bettors;
Technical and cybersecurity requirements, with the possibility of requiring nationally or internationally recognized certification; and
Integration or association of the operating agent with national or international organizations monitoring sports integrity.


Organized Crime

Interested parties must also adopt internal policies, procedures, and controls to prevent money laundering, terrorism financing, and the proliferation of weapons of mass destruction, and must provide data to the Financial Activities Control Council (Coaf).

These mechanisms must also seek to ensure responsible gaming and prevent gambling addiction, as well as the integrity of bets and the prevention of result manipulation and other fraud.

Prohibited Participation

The fixed odds operating agent or its controlled and controlling companies cannot purchase, license, or finance the purchase of broadcasting rights for sports events held in Brazil by any means or process.

They also cannot grant or advance values or bonuses for betting or make any arrangements to facilitate or facilitate access to credit by the bettor, even if autonomous representatives establish themselves in their establishment.

In this regard, an amendment approved in the Plenary, presented by Congressman Weliton Prado (Solidariedade-MG), allowed for the hiring of lottery agents.


Advertisement

Regarding commercial advertising, companies without authorization to operate the lottery will be prohibited from airing advertisements that make unfounded claims about the odds of winning or potential winnings that bettors can expect. These advertisements also cannot portray betting as socially attractive or contain statements from well-known personalities and celebrities that suggest that gambling contributes to personal or social success.

These advertising pieces cannot suggest or imply that betting can be an alternative to employment, a solution to financial problems, an additional source of income, or a form of financial investment. Additionally, their content cannot offend Brazilian cultural beliefs or traditions, especially those opposed to gambling.

In these situations, communication companies or internet providers and websites must remove the advertising from circulation after notification by the Ministry of Finance.

Regulations may provide for restrictions on the timing, programs, channels, and events for the dissemination of betting advertisements to prevent them from being shown to minors.


Bettors

The text guarantees bettors all the rights provided for in the Consumer Defense Code (Law 8.078/90) and also access to clear information and guidance on how bets work, the conditions and requirements for forecasting, and the withdrawal of winnings.

To facilitate this, the operating agent must provide a toll-free electronic or telephone channel for access and use.

According to the project, officials and shareholders of the operating agent, public agents linked to federal regulation or supervision of these bets, or individuals with access to the computer systems of this lottery, will not be able to place bets on these apps.

Minors under the age of 18 and individuals who may have or may have any influence on the outcome of fixed odds betting lottery events are also prohibited from playing, including:


Sports officials, coaches, trainers, members of technical committees;
Referee and assistant, sports agent, agent or attorney for athletes and coaches;
Member of a sports federation or confederation; and
Athlete participating in competitions organized by entities belonging to the National Sports System.

Bets made by these individuals will be considered null and void. This applies equally to spouses, partners, and direct and collateral relatives up to the second degree.

The notice of this prohibition must be prominently displayed on online or physical channels for the sale of this lottery, as well as in messages, publications, and advertising pieces.

The bill stipulates that the lottery operator must adopt procedures to verify the identity of bettors, including cross-referencing information with public or private databases.


Betting Integrity

Another obligation of the lottery operator will be to adopt security and integrity mechanisms for fixed odds betting. Events on which bets will be placed must also have actions to prevent result manipulation and corruption.

For this, the lottery operator must integrate with a national or international organization monitoring sports integrity.

Bets proven to have been made with result manipulation and corruption in events will be null and void.


Payments

In order to prevent circumvention of regulation, the text transfers to institutions authorized to operate payment arrangements the prohibition of processing transactions related to bets made with unauthorized companies.

For the payment of bets and prizes, only institutions authorized to operate by the Central Bank will be able to offer virtual accounts or financial services of any kind.

Resources from bettors held in transaction accounts with betting websites will be considered separate assets, distinct from the assets of the operating agent. Thus, the values cannot be subject to seizure, attachment, or judicial order due to debts of betting companies, for example.

The withdrawal of resources from these transaction accounts can only be made through transfers, credits, or remittances to bank accounts held by the bettor in financial institutions headquartered and managed in Brazil and authorized to operate by the Central Bank.


Unclaimed Prize

Regarding prizes not claimed within 90 days, which under the original text would be fully allocated to the Student Financing Fund (Fies), an amendment approved by the Plenary, presented by Congressman Gilson Daniel (Podemos-ES), allocates 50% of unclaimed prizes to the National Fund for Public Calamities, Protection, and Civil Defense, leaving the other half with Fies.

Source: Câmara de Notícias Agency