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Last week, President Michel Temer signed a new law that authorizes legal live and online sports betting in Brazil.
That brings a market of more than 200 million people out of the gray area and into the world of consumer-protected sports betting.
A regulatory system to manage the new law is probably still at least two years away. That means implementation remains beyond the horizon.
Detailed text of the law is not yet available. Provisional Measure 846/2018 simply tasks the Ministry of Finance to develop the regulations over two years.
If that isn’t enough time, the measure allows for an extension of another two years.
Brazil operates a federal system that gives states considerable autonomy, including over gambling legislation. However, the Ministry of Finance operates nationwide so that the regulations will apply across the country.
Article 29 of the “Draft Law of Conversion” gives the Ministry of Finance the power to license live and online fixed-odds sports betting operations in a competitive environment.
The implication is that no state monopoly will take control of the market and the big brands of the overseas operators will get full market access.
In 2016, President Temer appeared to propose a state sports betting monopoly. His idea was to create a state-run monopoly in partnership with an international sports betting provider. The government would then privatize the company and pocket the proceeds.
This idea has been shelved.
The new law’s details are sketchy as far as operators are concerned, but land-based sports betting must return 80 percent of handle to bettors. Online operators must return 89 percent.
These numbers guarantee great odds for sports bettors but will put some pressure on margins.
On top of this, the government will take 6 percent of handle from live operators and 8 percent from online operators.
The law’s main purpose was to revise the distribution of lottery profits. This area is still subject to various legal challenges.
There is tension between the federal government and the individual states. Both profit distribution and legal control are under legal challenge.
The current law proposes that 2.5 percent of revenues from live sports betting and 1 percent of online revenues go to the National Public Security Fund (FNSP).
The fact that sports betting is included in the bill in an ancillary way means that Brazil is not introducing full-scale gambling liberalization.
In 2007, the Brazilian Supreme Court ruled that all forms of gambling not specified in legislation are illegal.
Nevertheless, online gambling remains in a legal gray area. There is no law banning internet players from gambling, and no law banning overseas companies from targeting the Brazilian market.
This allows the major online gaming companies to remain in the market without a specific law enabling online gambling.
In November 2015, the government established a parliamentary “Special Commission on a Regulatory Framework for Gambling in Brazil.”
The commission was tasked with creating a complete regulatory framework for all gambling in the country.
When Temer became president, he failed to support gaming liberalization in its broader aspects. All that remains of the original grandiose plans for online gaming is the limited legalization of sports betting in this latest law.
The newly elected populist president, Jair Bolsonaro, has yet to take office. But his comments already indicate that he may be more open to future legislation for online gaming.
Brazil is the fifth-largest country in the world. As a legal market, it will attract much more marketing attention from the major international operators.
In a sense, although there is online sports betting already available in Brazil, the market is under-developed.
The legal framework will not only provide genuine consumer protection for sports bettors; it should boost revenues for operators. Investment should increase as operators have the confidence of a fully legal sports betting environment.
It likely won’t happen quickly, but operators could soon generate a significant portion of their revenues from Brazil.