Since 2018, the global betting market has been waiting for the regulation of the sports betting market in Brazil. That year, the then President of the Republic, Michel Temer, legalized the activity of sports betting in the country, but left the regulation of the subject under the responsibility of a decree, which should happen in 2022.
Given the expectations on the subject, several operators began to look to the Brazilian market as the main focus of their operations, since the country of football is, for obvious reasons, a land full of opportunities for the sports betting market.
As a result of this market expectation, what we have seen is an advertising market taken over by companies named with a prefix/suffix plus the three most famous letters in the current Brazilian advertising scenario: BET.
Football clubs, sports websites, advertising boards in stadiums, television commercials… Nothing seems to escape the imminent entry of sports betting companies in Brazil.
And it is precisely these companies that will play a key role in building an environment of integrity, security and in line with the principles of compliance and responsible gaming for bettors and for free competition in the sports betting market in Brazil.
Recently, a new version of the decree regulating sports betting in the country was circulated and, among the discussions that are already proliferating in the interested groups, one point in particular should receive greater attention from all those who are concerned with the integral formation of this new market: licensing, to be carried out by the public authorities, of those operators that will operate in the market.
When we read the most recent version of the decree made available to the public, we noticed that several technical and financial criteria were established for the granting of licenses: payment of a fee, technical certifications, proof of an integrity program and prevention of money laundering, customer service channels, public, responsible gaming policies, among many other requirements that, at first glance, convey a good impression to those who intend to act, as they follow good practices already constant in more mature markets.
But of all the forecasts contained in the draft decree, one of the biggest hits by the Executive is in the definition of the model of exploitation of sports betting (or fixed quota, as defined in Law 13,756/18): the model of authorizations. This format avoids the creation of monopolies in the sector, enhances the government's gains in terms of revenue and benefits the gambler, who may have more options for operators to choose the one that best serves them.
However, at the same time that the draft decree indicates this virtue, it puts it at risk, more precisely in article 31, which has the following wording:
“Art. 31. In the first twelve months of validity of this Decree, the regulator may restrict authorizations, referred to in art. 4, upon justification and previously established schedule.”
The big problem with this text is precisely the possibility of creating a mechanism to limit operators, even in the first 12 months, under criteria that are not transparent and exclusive to public authorities.
The risks brought by art. 31 are many and can generate from a market reserve to the distrust of operators in the legality of the operation licensing process, which does nothing to create an environment of integrity and in line with the principles of compliance.
On the contrary, it only encourages illicit practices and challenges the integrity of the public authorities in charge of granting authorizations, which, by the way, is harmful to everyone: public authorities, which convey an image of distrust in their actions; the operator, who will have the suitability of his authorization questioned; and the consumer, with a lack of security about the market.
Along these lines, there is another device with the potential to generate problems: art. 4, §3, I, as it conditions the operator's approval to the presentation of a technical qualification, without defining what this would be, thus leaving the attribution to the Ministry of Economy by means of an ordinance.
The issue is sensitive, because depending on what is defined as technical qualification, a market restriction can be created. If technical training is limited to previous experience in the operation, we will have the absurd situation of, in Brazil, only having foreign operators.
It is worth noting: the lottery modality of fixed-odds betting is new in Brazil, so, naturally, no Brazilian operator has previous experience in the operation, unlike foreigners, who, in addition to operating abroad, have operated in the Brazilian market while it is gray – that is, although legalized, it is not regulated.
Creating a product in Brazil aimed exclusively at foreign operators is, to say the least, nonsense. Instead of promoting the national, which generates income and direct jobs here, what comes from abroad is preferred and which, as much as it operates in the country, will take a good part of the income generated here abroad.
Rules like this undermine the industry's credibility and should be avoided. Thus, even in view of the free market, a constitutional value that is covered by the draft decree, it is important that operators do not have their access to the market barred due to non-technical and unclear requirements. The decree and supplementary ordinances must avoid discretionary restrictions. The government, it is worth remembering regardless of the sector in which it operates, must ensure that the market is open, transparent and extremely technical, always protecting free competition and assuring service borrowers that their rights will be fulfilled.
RAFAEL MARCHETTI MARCONDES
Professor of sports and tax law; Doctor and Master in Tax Law from PUC-SP; MBA in Sports Management from ISDE in Barcelona; Chief Legal Officer at Rei do Pitaco
FERNANDO PEDRO ZANDONADI VASCONCELOS
Postgraduate in compliance from FGV-SP and in sports law from the Instituto Ibero-Americano de Derecho Deportivo (IIDD); lawyer (compliance and data privacy) at Rei do Pitaco
