In a landmark decision, the Brazilian government has set a December 2024 deadline for gaming operators to secure their licences or face stringent penalties starting January 1, 2025. This mandate is spelt out in the newly-published Normative Ordinance 827, featured in the Official Diary of the Union on May 21, 2024.
Normative Ordinance 827 delineates the essential steps for obtaining sports betting and gaming licences in Brazil, marking the beginning of an “adjustment period” for operators. Active gaming businesses have until December 31, 2024, to align with the new regulatory framework or face the consequences. Priority will be given to applications submitted within 90 days of the ordinance's release.
This ordinance (SPA/MF No. 827/2024) is part of the Ministry of Finance's broader strategy to finalise regulations for implementing fixed-odds betting in Brazil through a four-stage process. Collectively, they aim to establish a foundation for legal betting activities in Brazil.
The first stage, as outlined in Ordinance 827, sets out the technical, security and payment requirements operators must follow, establishing the rules to operate fixed odds betting activities within the nation’s borders. Stages two, three and four, planned for the end of May, June and July respectively, aim to address anti-money laundering and fraud, the procedures for monitoring gambling advertisements and allocation procedures for contributions to socially responsible causes.
The Implications of Ordinance SPA/MF No. 827/2024
Brazil’s new ordinance shakes up the iGaming industry with strict data and operational requirements. The ordinance mandates that all betting systems and data centres that operators use must be based within the country, highlighting Brazil’s commitment to maintaining control over betting data. Exceptions are only permissible if data centres are in countries with an International civil and criminal Cooperation Agreement with Brazil and comply with its data protection laws.
The new regulations further clarify that operators must also grant full system access to SPA inspectors, ensuring meticulous compliance. This stipulation forces operators to establish local infrastructure and secure third-party certifications for their betting systems. The need to use the “bet.br” domain further brings the underlying focus on localisation to the forefront.
Licences on Hold? Potential Delays Threaten 2025 Kick-off
While some sources suggest licences might be issued by Q4 2024, with operations commencing in January 2025, others anticipate potential delays. Initial application guidelines, expected in April, faced setbacks. Despite one lawyer describing the timeline as "daunting," the Ministry of Finance remains optimistic, encouraged by an anticipated increase in staff at the Secretariat of Prizes and Bets (SPA).
I expect a significant workforce expansion at the authority in the coming weeks to meet the deadline
The lawyer remarked, noting parallels with staffing increases in other sectors like finance.
Further fuelling the debate, some commentators have expressed concern that the new regulations might initiate regulatory bottlenecks. Authorised testing agency Gaming Laboratories International, for instance, has voiced concern that the high volume of applicants could slow the process down, citing a call for interest in January that resulted in 134 responses from local and international operators.
Despite current volatility and, at times, lack of clarity, Brazil’s online betting market has enormous potential. With its substantial market size, a growth rate of 15% is predicted annually over the coming years, which can grow further with a robust regulatory framework in place. Companies like Bet365, Betfair, and Betsson are touted as being among the most likely to be among the first to capitalise on the regulated market, leveraging their international experience and compliance capabilities. However, it should be noted that the market involvement of these particular brands is predominantly hearsay and not based on hard evidence.
Regulatory Challenges for International Operators
The positive takeaway from recent events is further confirmation of Brazil’s intent to stay on track in constructing a regulated framework for online gambling. Finalisation will open up sizable opportunities for international companies in 2025 and beyond. To get involved, foreign operators have several challenges to overcome. They must first establish a local subsidiary with at least 20% Brazilian ownership, which can be fulfilled by either the participation of a Brazilian national or by a company with its headquarters and administration in the country. Any changes in corporate control thereafter must be reported to the SPA for review.
Applicants must also demonstrate a solid financial reserve of at least BRL 5 million, prove their qualification to operate, and provide compliance declarations certified by the Central Bank of Brazil. Once approved, licensed operators will secure a five-year licence for a hefty fee of BRL30 million (€5.25 million), granting the ability to operate under three domains.
Still, that’s not all. Applicants must also secure a joint certificate from the Special Secretariat of Federal Revenue and the Attorney General’s Office of the National Treasury, proving they are registered to pay taxes in Brazil. Ongoing taxes are expected to be 12% of gross revenue, along with monthly inspection fees. All key personnel and financial beneficiaries must have clean criminal records with no history of bankruptcies, tax evasion, or embezzlement.
Significant penalties await those who flout Brazil’s online gambling rules. Offenders face warnings, colossal fines of up to BR$ 2 billion (approx. €350.25m), and potential revocation of their authorisation. Moreover, they risk being blocked from obtaining new approval for a decade, participating in public service bids for at least five years, and serving in lottery-related roles for up to 20 years.
Steps for compliance before the end of 2024
To operate legally in Brazil by the end of 2024, iGaming operators must take the following steps:
1. Understand requirements: Get familiar with Ordinance 827 and upcoming ordinances to anticipate regulatory requirements.
2. Assess compliance readiness: Conduct a comprehensive review of operations to identify areas of non-compliance and prioritise remediation efforts.
3. Build local infrastructure: Establish data centres within Brazil or ensure stringent compliance for foreign centres to meet Brazilian standards.
4. Develop compliance policies: Implement compliance policies and procedures to safeguard adherence to regulatory guidelines.
5. Acquire essential certifications: Secure certifications from accredited third-party entities for betting systems, demonstrating adherence to technical standards as directed within the ordinance.
6. Domain registration: Operate under the “bet.br” domain to align with local branding and regulatory requirements.
7. Prepare for scrutiny: Be primed to grant SPA inspectors full system access for rigorous compliance checks.
8. Submit detailed reports: Furnish comprehensive evaluation reports on technical compliance within 90 days of SPA authorisation.
9. Follow due phased regulations: Adhere to the phased implementation of additional ordinances covering anti-money laundering, licensing, and responsible gaming practices.
Act now before the final deadline for authorisation
As of January 1, 2025, companies operating in Brazil without authorisation from the SPA/MF will be subject to applicable penalties, and payment providers will no longer process transactions involving fixed-odds betting by unauthorised operators.
For iGaming companies in Brazil operating when law number 14.790/2023 was published, authorisation must be secured by December 31, 2024. Thus, operators should file a request no later than August 20 to ensure it will be granted while meeting all ordinance requirements. With this deadline already passed, operators can still apply, though there is no guarantee of securing a licence before the new regime goes live.
Contact Altenar today to learn more about the promising opportunities and challenges shaping the future of online gambling in Brazil and the Latam region!
