Allowed in Brazil since 2018, sports betting spread meteorically and became a fever. The operating companies are in football stadiums, in club uniforms, in media advertisements and in the smartphones of bettors, who are devotedly dedicated to forecast analysis. Industry connoisseurs heard by GHZ newspaper estimate that the Brazilian public currently has between 500 and 1,000 sports betting sites available, generally hosted outside the country. A billionaire market.
The questions that hang over sports betting and leave the sector in limbo — without oversight, tax collection or legal commitment to best practices — are due to the lack of regulation. In 2018, the activity was authorized after its inclusion in Law 13,756, which deals with the lottery and the allocation of its resources. The norm determined the general guidelines, but the functioning criteria would have to be established from the regulation, stage in which the public power details the set of rules for an activity. The deadline for the procedure was up to four years, but the Jair Bolsonaro government, pressured by the evangelical bench, left the matter in the drawer.
Now, the Minister of Finance, Fernando Haddad, announces that the regulation will be carried out through a provisional measure by the government of Luiz Inácio Lula da Silva. The intention is to proceed soon, and the Union has already projected to raise around R$ 6 billion (US$ 1.15b) a year. However, in view of calculation differences, the estimate is on hold. The activity is sensitive, and the Planalto Palace is anchored in the arguments of taxation, job creation, inspection and punishment to carry out the intention.
“There is no way to escape from an economic reality that has presented itself. Companies have a lot of money and this feeds the sports industry, but it is necessary to have as an indispensable pillar the protection of sports integrity. Could we discuss the ban? There's no other way. Sites can be anywhere in the world, and people will bet. We need to regulate for the money to stay here, with investment in scientific inspection, social projects and promotion of sport in Brazil,” says Andrei Kampff, a lawyer specializing in sports law and compliance.
With the speed of business growth, amidst the void of rules and supervision, scandals of match-fixing jumped, initially in low-relevancy championships, but, recently, suspicions reached Serie B of the 2022 Brazilian Championship.
Despite more optimistic views, regulation will have to deal with the potential harm caused by pathological gambling and criminal practices. “They cause dependency, break up families, loss of property and jobs. They make room for crimes such as money laundering and match fixing. In addition to violating the law, it takes away the shine, the magic of sports, especially football, which is the great national passion,” opines senator Eduardo Girão (Novo-CE).
Sector businessmen are in favor of regulation
The sports betting operators and their associative representatives heard by the report are in favor of the regulation. In a note, the Ministry of Finance stated that it is preparing the text of the provisional measure with “rules of taxation, sanction, inspection of the sporting and financial integrity of betting in the country, with clear rules” and “monitoring of suspicious behavior.”
“The regulation will require betting companies to be headquartered in Brazil — since they are currently located abroad —, improving inspection, collection and dialogue with agents operating in the sector. The measure intends to prevent bets from being used as a means of carrying out money laundering,” informed the Treasury.
Without accountability to the Tax Authorities, it is a complex task to estimate how much this market is moving annually in Brazil. Some operators and entities say they are unaware of the data, while others mention disparate figures, always in the billions. The lack of soundness does not allow reproducing any estimate.
Top businessmen consider that many poles are making money with this market — operators, football clubs, media and gamblers —, it is fair, therefore, in their assessment, that the government also withdraws its share, as it does in any economic activity.
“Why couldn't (the government) collect? We all have licenses in other countries and have to pay fees. Brazil should also tax. So the money would not leave your country. We cannot forget the circulating economy. Regulating sports betting will bring many jobs to Brazil. It is a well-paid activity. There are other fees that may apply. It's a missed opportunity,” says Swedish Andreas Bardun, KTO's global CEO.
The entrepreneurs' assessment is that the obligation to have physical headquarters in Brazil and financial data monitored by the Federal Revenue Service and the Central Bank will drive away companies with a bad reputation. Bardun says operators have "a huge amount of data to share with regulators to help detect suspicious activity." This is a point that interferes with possible money laundering and manipulation of results.
“Today, we have artificial intelligence that performs user behavioral analysis. It points out when there is an abrupt change in frequency and bet values. The operator is interested in this because he does not want to suffer losses from fraud. It is possible to alert the regulatory body of the suspicious movement,” says Rafael Marcondes, director of the Brazilian Association for the Defense of the Integrity of Sport.
Regarding money laundering, he points out that one way is to adopt the “know your customer” tool, which consists of verifying ownership of the e-mail and CPF informed, in addition to checking any history of fraud. For criminals who seek to use oranges, there is recognition that supervision is more difficult, but not impossible: the rules must provide that deposits and withdrawals involved with betting must always be made in a bank account linked to the bettor's CPF. If there is movement incompatible with the individual's income in the volume of bets, it will be up to the Federal Revenue to detect and act.
For prosecutor Flávio Duarte, from the Public Ministry of Rio Grande do Sul, the regulation brings positive elements. He denounced a match-fixing scheme in which punters offered money to defense players for defeats by their team with scores of at least three goals and bonuses for committing penalties. This case took place in a youth championship and, as in the investigation of the national Série B, betting companies would be victims of having to pay high amounts for unlikely bets by fraudsters that would later be confirmed.
“I believe that the regulations will allow for a more detailed investigation. With companies headquartered in Brazil, those who investigate will be able to access all bets and data by CPF. It will narrow the screening and due diligence against fraud,” comments Duarte.
Another assessment is that the regulation will address rules and even protect the gambler, who will have his rights defined in a federal norm and will know who to turn to in case of conflict. A portion of businessmen understands that the rules are the only way to shield sports passion and romanticism. Otherwise, the current scenario of lack of control can lead to growing discredit, disillusionment and downfall.
“We want to preserve the sport, especially football. It is Brazilian cultural heritage, and we see it at risk due to the lack of rules and indications about who supervises it. The more it gets loose, the more we see scandals. This affects everyone: the club, the athlete, the fan. It is a billionaire market and Brazil has the potential to grow. We encourage regulation as soon as possible,” says Marcondes.
Another sensitive point, admitted by the sector, is that of pathology: gamblers who become addicted and start to face financial and personal dramas. Industry leaders argue that the standardization brings movement limits and the option of self-blocking. Once the lock is triggered by the bettor, he will have to comply with the self-imposed quarantine, which will, in theory, extend to all regulated sites. There is disagreement regarding the creation of a list in which the regulatory body can unilaterally exclude bettors from the platforms due to abusive habits. In the case of suspicious or criminal behavior, there is more consensus regarding banning.
“Pathological behavior will exist both in legalized and controlled gambling and in illegal and clandestine gambling. The advantage of regulated gambling is that you can have public policy for treatment. The pathological gambler is the insufferable drunk at the end of the night that nobody wants. He has lost control of his life and needs treatment,” says Magno José Santos de Sousa, president of the Instituto Brasileiro Jogo Legal (IJL).
Attention points
One of the doubts is about the incidence of taxation. There are operators defending that the income tax falls only on their profits, but the Brazilian legislation on lotteries, in which sports betting was included, charges 30% on prizes above R$ 1,900 (US$ 365). Santos de Sousa, from the IJL, understands that the current rule would determine the tax discount on bonuses paid to bettors. For Andreas Bardun, from KTO, this could lead a portion to play with operators in the illegal market, to escape the tax on the prize pool.
“In sports betting, you win sometimes and you lose sometimes. However, usually people lose more than they gain. Should the government tax the party that loses more money than it earns? Fair is to make operators pay a percentage of their profits. This is how it happens in the UK, considered the gold standard of sports betting licenses,” evaluates Bardun.
Another warning is made by Andrei Kampff, specialist in sports law: FIFA's Code of Ethics prohibits, in article 27, that people linked to football relate directly or indirectly with betting operators. This includes players, referees and officials, but what is seen on a daily basis is athletes starring in bookmakers' advertising campaigns, despite the mandate of football's highest body.
“Clubs may have the marketing relationship, but they need to be careful with that. We see athletes participating in advertisements and this is a problem. Obviously it can damage the integrity of the sport,” says Kampff.
Senator Jorge Kajuru (PSB-GO) is in favor of regulation, presented a bill for this purpose and understands that the mechanism will “avoid the bankruptcy of football clubs.” He points, however, to the operators' lack of knowledge about their customers: “There are 10-year-olds taking their father's credit card and spending it on bets. It becomes crazy in families".
Contrary to sports betting, Senator Girão also presented a project to regulate the sport in view of the fact that a 2018 law determines this. He wrote a proposal that he considers tougher, restricting advertising by operators. Still, he is pessimistic about the way things are going.
“All the supervision and control of sports betting will be little. The number of ludopaths only grows in the world, as well as manipulation. The fact is that Brazil is not technologically prepared for inspection,” assesses Girão.
Virtual casinos and bingos from abroad
Some sports betting operators have, as a secondary attraction on their virtual platforms, the option of games such as casino and virtual bingo. The regulation will have to deal with the subject, since the legislation that allowed sports betting says that the modality “consists of a betting system related to real events with a sports theme.”
In other words, by real events, that means football, basketball and other human-led games. The interpretation of Santos de Sousa, from the IJL, is that virtual casinos and bingos will have to be abandoned by regulated operators in Brazil. Federal government sources comment, on condition of anonymity, that the regulation will be exclusively for sports betting. Bingos and casinos are under discussion in Congress and will remain prohibited until any legal change.
On the side of operators, despite indications to the contrary, there is hope of maintaining alternative games, which also generate revenue.
Source: GZH
