Fixed quota lottery operating companies, locally known as “bets”, have been experiencing a boom in Brazil since 2018, when they were allowed to operate in the country. These sports betting sites - which are estimated to number 2,000 in operation - have become popular among Brazilians. In the first half of the year alone, according to data from the Central Bank, they generated US$8 billion.
Now, the sector is preparing for the arrival of regulation. The first step was taken in July, with the sending of Provisional Measure (PM) No. 1,182/2023 and a Bill to the National Congress. In addition to dealing with the structure and administrative processes for monitoring the sports betting market, allowing the government to tax companies and bettors, the expected regulation will provide new tools to curb the manipulation of bets and the operation of illegal websites. New rules for advertising on these sites and support actions for users against gambling addiction are also planned.
The expectation is that the changes will come into effect in 2024 and for them to have the expected effects, technology will play a preponderant role. For André Santa Ritta, an associate in the technology area at Pinheiro Neto Advogados, technology will be fundamental in enforcing a series of rules that must come into force, from the identification of the bettor – excluding, for example, minors and people who have influence on the outcome of a sporting event, such as a referee or coach – such as the identity of the resource used for betting on each event or sub-event (such as cards and corners in football).
“Through facial recognition, artificial intelligence, geolocation and resource volume monitoring solutions, it will be possible to identify suspicious patterns and organize the collected data in order to share it with government authorities,” he notes.
As in other industries, the use of technology will generate greater efficiency in the data collection and analysis process, in addition to proving that the distribution of income collected is following the previously established destination. “Technology will make it possible to measure the real size of revenue from this market,” comments Felipe Tricate, professor of sports management at Insper.
Technology combined with the fight against betting manipulation
Bet manipulation, especially those focused on sporting events, is a major topic of relevance addressed to technology. Even though the sports betting market is new in the country, there are already companies carrying out the work of monitoring the so-called odd (probability of an event happening) on a global scale, comments Tricate. “This proves the beneficial potential of technology to curb manipulation,” he adds.
The concern is not for nothing. Data manipulation in sports betting has grown across the world. For the first time since the launch of Sportradar's Universal Fraud Detection System in 2005, the number of suspicious matches detected surpassed the 1,000 mark in one year. In 2022, the company detected 1,212 suspicious matches in 12 different sports, covering 92 countries – an increase of 34% compared to 2021. In football and basketball, considered the most prominent sports, one every 171 matches, and one every 194 matches respectively are suspicious.
The expectation is that the new Brazilian law will impose protection mechanisms guaranteeing the integrity of sporting events and bettors. And here, technology acts as a huge ally. By enabling real-time monitoring of betting activities, including detecting suspicious patterns such as unusual money movements that could indicate match-fixing.
“Automated systems can alert regulatory authorities to suspicious activity, enabling a rapid response. Advanced algorithms can analyze game data, such as team and athlete performance statistics, to identify possible irregularities,” says Santa Ritta.
The list goes on. Since sports betting is conducted online, this creates detailed digital records of all transactions. These records may be audited by regulatory authorities to ensure compliance with rules and regulations. Additionally, digital records can be used to track money laundering and tax evasion.
Challenges in enforcing regulatory rules
For Santa Ritta, the biggest challenge is not so much technological, after all it is about solutions that already exist, but rather the good use of them. “The implementation of technology itself is not the main barrier. The challenge for betting platforms will be to integrate the systems into their operational structures and be sure of their correct application, in order to generate restraint mechanisms,” he adds.
This requires supervision, control and sharing of information generated with the responsible government body. “When we talk about fraud prevention, as is the case in other regulated sectors, accurate control mechanisms are necessary. The regulation will bring cooperation between authorities and the betting industry in sharing information. The magic comes from that,” assures the lawyer.
He also predicts that the new law will require direct communication channels and user reporting to the regulatory authority. “There needs to be an interface between both the platform and the user, the platform with the regulatory authority, and the user with the regulatory authority. Information sharing needs to connect everyone involved,” he adds.
Tricate, from Insper, sees yet another major challenge that technology will have in this process: access to information in sporting events with less coverage, such as amateur divisions. The same Sportradar report shows that the biggest growth in fraud in percentage levels comes from Africa (82%) and South America (72%), in games with lower levels of protection and integrity.
“These are events in which there is difficulty in accessing both television broadcasting and data collection, making them easy and vulnerable targets for people or groups with the intention of committing manipulation,” observes the professor.
Therefore, the joint effort is also to facilitate access to relevant information for regulatory authorities and for bettors themselves, including sports statistics, results history and real-time odds. Informed and protected bettors are less likely to engage in suspicious activity, and their only risk is even betting on the loser.
Source: MIT Sloan Review
