A law passed in 2018 allowed betting companies to operate in the country and they have surged in popularity since then, but the government says loose regulation has allowed the business to grow untaxed and lawless.
"The regulation will require that betting companies are based in Brazil," the ministry said in a statement, as most are based abroad, as well as "improving the supervision, collection and dialogue with the agents that operate in the sector."
It was unclear if opening a locally-headquartered subsidiary would be enough for a foreign-based firm to meet the requirement.
The moves, which include taxing the firms, are part of an effort announced by Finance Minister Fernando Haddad last week to boost fiscal revenue to offset increased social spending.
"Lack of regulation and collection of taxes also caused Brazil to fail to structure and maintain a monitoring network of suspicious behavior," the ministry added, saying it hopes the reform can help crack down on money-laundering, manipulated results and help penalize those responsible.
Two ministry sources said the measure could bolster public accounts by some R$ 2 billion to R$ 8 billion reais (US$385 million to US$1.54 billion) annually, though the calculations have not yet been finalized.
The ministry did not say how the business would be taxed or what the rates might be.
Cristiano Maschio, CEO of online gambling servicer Qesh, says some R$ 12 billion (US$1 = R$ 5.1910) is expected to change hands in sports betting this year, with more than 36 million people predicted to visit Brazil's betting sites.
Source: Reuters
