In December 2023, the enactment of a law regulating gambling and sports betting by Brazilian President Lula da Silva marked a pivotal moment for the iGaming sector, set to have a profound global impact on business development throughout 2024.
The introduction of the new legislation, known as the GEO, is poised to instigate a significant redistribution of forces within the global gambling market. This transformation is expected to influence all facets of the industry over the next decade. Brazil, being the largest Portuguese-speaking country and the most populous nation in Latin America with a fervent fanbase for football and other sports, has become a focal point for major industry players. In light of this regulatory development, a fierce competition is anticipated as these players vie to establish and conduct business in the country. The emergence of licensed bookmakers and the departure of online casino operators from the "gray zone" are expected, marking a shift towards operating on a legal basis.
How it All Began - Elite Casinos and the Ban on Gambling
Recalling the lesser-known history, during the 20-30s of the 20th century, Brazil was renowned not just for its vibrant carnivals but also attracted gamblers to Rio de Janeiro. Major cities and especially the coastal areas were adorned with opulent casinos, rivaling those on the French Riviera in terms of sophistication and revenue. Despite this, in 1946, due to Brazil's religious inclinations and public opposition to gambling, a comprehensive ban was enacted, prohibiting gambling establishments and betting. However, the ban had exceptions - horse racing (under complete state control) and poker (excluded from the category of gambling for money). It wasn't until 1969 that the lottery was legalized, with operations overseen by the Ministry of Finance.
The advent of the Internet and online casinos posed challenges to curbing the rise of "gray" gambling in Brazil. Notably, the 1946 law applied solely to organizations registered in Brazil, allowing foreign operators to enter the Brazilian market in the "gray zone" through online advertising without facing consequences. Despite a 2014 law providing authorities with the technical ability to close gambling sites and fine operators, serious measures to halt their activities remained elusive. This allowed apps like Wanna, catering to Brazilian gamers, to operate successfully until 2023.
The Battle Over Betting and Regulatory Attempts
Brazil shares borders with the United States, boasting a population of 214.3 million as of 2021, and Brazilians are renowned for their intense enthusiasm as some of the most passionate football fans globally. These factors have piqued the interest of major players in the global gambling industry. Efforts were undertaken to integrate and regulate betting, propelled by the advocacy of large companies representing the gambling business's interests. Simultaneously, several entities operated in the "gray zone," extending betting offers to Brazilians and inviting them to participate in virtual casinos.
The journey toward legalizing betting at the governmental level in Brazil commenced only in 2018. While betting was permitted, the law was not finalized until July 2023. Crucial changes were introduced in the taxation realm, including an increase in the income tax for betting operators from 16% to 18% in 2018. The Brazilian Ministry of Sports was designated to receive 3% of the income, up from the initial 1% outlined in 2018. For players winning more than $500, a steep 30% tax was imposed. The cost of the betting operator license was revised to R$30 million, surpassing the previously established R$22.2 million. Operators now face a tax of 30.82% of gross income.
Since 2018, the National Secretariat for Gaming and Betting (SNJA), a regulatory organization, has been active in Brazil. Betting is permissible only if it aligns with international responsible gaming rules, precluding operators from obtaining broadcasting rights for competitions.
In a significant development, the law regulating sports betting and gambling received final approval from the President in December 2023.
Results
Despite the considerable taxation and licensing costs, Brazil has emerged as one of the most promising areas in the industry. Anticipated substantial investments are poised to propel rapid development, with the nation's fervor for sports justifying operators' additional expenditures.
For gamers, the adoption of regulatory laws ensures a safer gaming and sports betting experience, thanks to enhanced payment controls.
