"1. Understanding the Grey Market
In Brazil, casinos and bookmakers have been banned since 1946, and yet the act of placing a sports bet is not exactly illegal. Although our 1946 legislation prohibited the establishment of land-based structures for gambling, the subsequent evolution of the internet has allowed online betting from international servers to operate in a non-regulated “grey area”.[i]
According to Brazilian law, the contract entered by and between two parties is considered constituted at the place of the proponent. In view of this and the fact that a “bet” is considered a contract by Brazilian jurisprudence, the offshore operator (i.e. the ‘proponent’) with a website hosted in another jurisdiction is permitted to offer bets to Brazilian clients, being such contract subject to the law of the operator’s country.
After decades of tolerating this legal loophole, Brazil is finally ready to regulate its whole sports betting market. Federal Law nr. 13.756 of December 2018 primarily regulates the Brazilian national lottery, but it also includes provisions to regulate sports betting (a category defined as “fix-quota betting related to sporting events”) and its related tax revenue allocation. Pursuant to Article 29 of the Law, the “fix-quota betting” category will be a public service, and the Federal Government will be able to issue licences to commercial operators, both online and in land-based structures.
Brazil’s Ministry of Economy now has two years – extendable for another two – to develop suitable regulations for the industry. Hence, the expectation of the industry is that the regulatory framework will be in place by the end of 2022 at the latest.
In view of such legal transition, betting companies are paying close attention and are already positioning themselves to invest in the country. Whilst some operators feel comfortable to offer bets and take advantage of the Brazilian “grey market”, some of them anxiously await the regulation of the industry before making a move.
2. Tropicalise your Operation
Irrespective of being a turnkey or a white label, many operators assume that the simple translation of their website into Portuguese would suffice to bring their operation to Brazil, but that’s not the case.
Brazil is completely different from other markets, even if we compare it with other South American countries – let alone European and Asian. The foreign operator has to adapt its operation to Brazil, or, in other words, “tropicalizse their operation”.[ii]
“What does the Brazilian gambler want?”
That’s the main question to be asked; and the precise answer will only be given by local specialised professionals from the field. One clear example of this particular culture is the ‘boleto bancário’ (bank billet), which is a very common (and indispensable) payment method used by Brazilian gamblers to deposit money into the betting platform. The absence of such an option would most certainly drive bettors away from the bookmaker.
Bringing an operation to Brazil consists of several steps, that vary in accordance to the investment the company is willing to make. Besides a clear understanding of the gambling complex legal situation, designing a website focused on the Brazilian gambler, hiring a solid and safe payment method company, hiring an IT department to hold everything together and developing marketing strategies (such as affiliation, social media and even club sponsorship) to successfully reach Brazilian gamblers are some of the many steps along the way.
Therefore, it is very important for foreign operators to have connections in Brazil, especially with those who know the market from inside, follow very closely the regulatory process and have strategic partnerships capable of providing the operator with a roadmap of the business path that the operator has to follow in Brazil.
3. Brand Consolidation
After duly observing the two previous aspects, it is time to consolidate the operator’s brand on Brazilian territory. Acquiring the confidence of the Brazilian public is certainly not an easy task, but it is indeed very rewarding. Perhaps the main successful case of Brazilian operation is Sportingbet.
Sportingbet invests in Brazil since 2007 and now the Brazilian gamblers see the brand all the time on TV commercials, outdoors and online advertisements. The closeness with its target audience on a daily basis generates confidence for those who wish to bet on sports, which in turn makes bettors comfortable depositing money into their platform.
Such reputation will certainly come in handy when the regulatory framework is issued by the Ministry of Economy, in particular because there is a possibility that Brazil might limit the number of licences to be granted to operators.[iii]
Hence, by establishing its brand and acquiring the confidence of the public in Brazil, operators will have higher chances of being granted a licence when the regulatory framework is issued by the Ministry of Economy. “First come, first served”, you may say.
Conclusion
The global sport betting market is growing exponentially and operators are now paying close attention to the developments in Brazil given its sizable investment potential.
A report commissioned by the remote Gaming Association (RGA) and conducted by KPMG in late 2017 estimated the offshore online grey market to be worth USD 2.1 billion annually in GGR (Gross Gaming Revenue) terms[iv]. A recent GamblingCompliance report estimated that a mature Brazilian online and land-based betting market could generate annual gross revenue of USD 1 billion for the country, subject to the introduction of a competitive licensing regime for online betting.
With all these statistics in mind, operators naturally study their possibilities to bring their operation to Brazil. Whether to start exploiting the current “grey market” right away or to wait the regulatory framework before establishing its business in Brazil, the fact is that standing still will most certainly result in a lost opportunity.
Udo Seckelmann
Udo is an attorney graduated from PUC-RJ (2017) and holds a Masters in International Sports Law from ISDE (2019). He works at Bichara e Motta Advogados in sports law, civil litigation, arbitration and dispute resolution. In 2019 he did a temporary internship at Lewis Silkin and advised World in Motion in London. Articles include FIFA Regulatory Changes, Contractual Hazard: Medical Examinations, The Endless War Against Agents: A Cap on Commission?, Getting into Sports Law: 5 Tips No-one Tells You, Beauty and the Gambler: A Love Story Between Football and Betting and How to Bring Your Sports Betting Operation to Brazil.
