It seems that finally, after more than four years, we will see the regulation of the fixed-odds lottery. Apparently, the series of scandals involving possible manipulation of results reported by the press in the last 30 days was the final straw to make the issue of regulation move.
There is an undeniable need and urgency to regulate sports betting and much of the technical work has already been carried out by the previous management. The concern that affects all of the market is whether the current regulators, without having had the opportunity to delve into the specifics of such a unique and complex activity from a technical-regulatory point of view, could create restrictions or requirements that could reach the extreme of making it unfeasible. the market. Here are some examples:
Number of Licenses
Much has been discussed during the last four years about the number of licenses for the operation of sports betting, until in the last version of the decree made public, the government would have accepted the argument that only with an unlimited number of licenses available would it be possible to bring the existing offer for the regulated environment. Restricting the number of operators would be a big mistake: it would automatically create a gigantic black market, without any chance of further regularization.
License Cost
The latest estimate of the cost of fixed quota lottery licenses was BRL 22.2 million (something around USD 4 million). This license fee was already excessive, completely out of the world's reality.
In Denmark the license costs DKK295,800, which is equivalent to approximately USD 425,000 or BRL 2.2 MM. In Malta, a license that allows you to operate internationally costs €25,000, that is, around BRL 140,000. In the Netherlands, the license application costs EUR 28,000, that is, around BRL 155,000. In Nevada, the gaming capital of the world, the fee is USD 500,000, which is, around BRL 2.6 million. In Portugal, the fee is EUR 30 thousand (BRL 165 thousand), already considering the costs of homologation of the technical system. Even in the United Kingdom, whose market in terms of GDP is 50% larger than the Brazilian one, the license is around GBP 770,000, which does not exceed BRL 4.8 million.
It is nonsense to believe that the license of only fixed-quota sports betting, without online casino operation, could be worth as much as is speculated. This amount of over BRL 20 million will only serve to encourage operators to remain in the unregulated market, which will cost the government much more in terms of tax collection in the future.
Advertising Restrictions
Much is discussed in the world about the limits of betting advertising. The importance of regulation and responsible gaming measures with regard to advertising is indisputable, but we cannot forget that Brazil will be a regulated “green field” market, that is, a market in which the possibility of sponsoring teams and advertising will be a essential element for the population to be able to differentiate between legal and illegal operators. Excessively restricting the possibilities for advertising sports betting, when the regulated market is opening up, would imply removing part of its attractiveness, benefiting those operators who decide to remain illegal from much more than protecting the population.
Proper and Reasonable Taxation
The first version of Law 13,756/2018 established a totally impracticable form of taxation, based on the total amount wagered (“turnover”) as the basis for mandatory transfers of the fixed quota lottery. The regulatory body itself recognized the need for change and coordinated efforts so that, in 2021, the law was changed. Taxation began to be based on the difference between turnover and payout (the so-called “GGR”, or “Gross Gaming Revenue”), in percentages that, added to other applicable taxes (PIS, COFINS and ISS), reached reasonable levels in comparison with other countries.
It would also be a serious mistake for the regulator to try to change these norms, under the risk of making the activity unfeasible if the charging base returns to Turnover, or if the tax burden on the activity (that is, excluding income tax and social contribution on net income) exceeds 20%.
As the examples of Italy, France and Portugal teach us, excessive taxes on gambling activity only result in a larger illegal market.
On the other hand, there is a great opportunity to correct one of the biggest problems of Law 13,756 regarding the taxation of sports betting winnings. Since it is an activity completely different from other lottery modalities, since the winnings are much lower compared to the amount wagered, and the frequency of play is much higher, necessarily implying repeated gains and losses, the tax of income should focus not on each prize exclusively, as currently foreseen, but rather on the amount actually won by the bettor, which could be verified at the end of a game session, thus including the period between the deposit(s) s) and the first withdrawal made by the bettor, as in Spain.
Alternatively, a simpler solution may be to increase the waiver limit for winnings up to 300 times the stake, as in the US. In any case, it is imperative that the value of the bet is excluded from the tax calculation basis.
We hope that this article can contribute to the work being carried out by the Brazilian Executive.
In an upcoming article, we will discuss how companies can prepare to operate in Brazil when the betting market is regulated.
Luiz Felipe Maia
Partner at MAIA YOSHIYASU ADVOGADOS
