The sports betting market, which took off mainly on the internet, entered the Lula government's sights. With an eye on the volume of funds that are moved, the Ministry of Finance is preparing a provisional measure to tax both companies and gamblers. The rates could be between 15% (companies) and 30% (gamblers) – in the latter case, with the forecast to exempt prizes with a value lower than the first bracket of Income Tax, currently at R$ 1,903.98 (US$ 377).
It must be remembered that these bets have been released in the country since 2018; what was missing was its regulation. That's what the government intends to do now. The move ended up shedding light on another market segment – that of electronic games, which does not even have a legal framework in the country.
To understand a little more what should happen, Veja’s column talked to Marcelo Padua Lima, a partner at Cascione Advogados, a law firm specializing in issues related to legislation and banking regulations, payments, the securities market, foreign exchange and foreign investment. “Compared with other countries that already have some kind of regulation regarding these matters, such as the United Kingdom, it is possible that the delay in regulation is harming the development of these segments in the country's economy,” he says.
The government wants to tax electronic games in Brazil. Sector representatives are favorable, as it makes this market official. How do you see this question?
Since the end of former President Temer’s term, when Law No. 13,756/18 was published, the sports betting segment has been waiting for regulations to be issued in the country. The regulation should bring more clarity and legal certainty to players and entrepreneurs who seek to develop their businesses, as well as providing new sources of tax collection for the government. But so far the regulation has not been edited. Despite this, the current government has signaled its intention to regulate sports betting, in particular to expand the sources of tax collection.
Electronic games, in turn, do not have a legal framework or regulation in Brazil. Despite this, a bill (2796/21) is currently being discussed in the National Congress that proposes to create the legal framework for the activity in the country - an industry that is increasingly relevant and that rivals the music, film and streaming industries. The current wording of the bill removes any equating of electronic games to slot machines and other similar games of chance (such as sports betting).
The main objective of the bill is to promote the electronic games industry, expressly ensuring the freedom to carry out these activities and granting tax incentives to the sector. It should be noted that the bias of the bill is tax relief for electronic games, unlike what is sought in the case of sports betting.
Who gains and who loses from this?
The regulation of sports betting can benefit a number of parties, notably: gamblers, who will have greater legal protection and potentially easier to exercise their rights; entrepreneurs, who will have greater legal security to develop their activities in the country; government, which can foster an expanding market and increase tax collection; and sports entities, which may receive new sources of income, as they contribute to the dissemination and execution of sports betting lotteries.
It is possible that the regulation creates restrictions on foreign companies that are not interested in developing their activities locally. In this case, these companies will be harmed. In addition, the regulation of sports betting can bring discomfort to a portion of Brazilian society that is unfavorable to the practice of betting in general. The regulation of electronic games, in turn, tends to bring benefits to companies in the sector, which will be able to reduce their tax burden. Tax incentives can also encourage the arrival of foreign companies that work in the development and production of electronic games in Brazil and generate more jobs in the country.
Additionally, tax relief can bring indirect benefits to consumers of electronic games, as long as the tax savings translate into a reduction in product prices.
Recently, the Court of Justice of the Federal District and Territories (TJDFT) prepared a very interesting technical note on the subject, whose content may influence some public civil actions that were filed against large distributors of online games. What does it mean in practice? What is the impact on the market – for companies (apps) and/or gamers?
This year, the TJDFT issued Technical Note CIJDF n.º 9/2023, which deals with loot boxes (“reward box”). It is still too early to assess the extent to which the technical note will effectively impact the ongoing public civil actions (which question the systematic monetization via loot boxes and seek to typify the activity as a game of chance), but we understand that the work developed by the Justice Intelligence Center of the Federal District in the analysis of loot boxes has great value for the debate on the subject in the country.
In addition, the aforementioned note indicates that international regulatory experiences serve to enrich the debate on loot boxes, but that they should not be seen as “off-the-shelf solutions”, in view of the particularities of Brazilian society and the various interests involved. While there is no legal definition or clear understanding of the courts on the subject, companies that develop and distribute electronic games would be able to continue implementing loot boxes, although this practice is not free of legal risks in the current scenario.
In this context, it remains for companies operating in the sector to take certain measures to mitigate the risks associated with offering loot boxes, such as providing transparency on the probabilities of obtaining items available in them; limit the offer through loot boxes to aesthetic items only; and observe the norms for the protection of children and adolescents in the advertising of loot boxes, as well as inserting parental control mechanisms to guarantee adequate access.
Is the country lagging behind in regulating this market compared to other countries like the US or even Europe? Why?
Brazil has not yet regulated sports betting and electronic games (including loot boxes). This fact brings some challenges to the development of the sector and increases legal uncertainty for players/bettors and entrepreneurs, as well as affects potential revenue that the government could obtain from tax collection, especially on sports betting.
If compared to other countries that already have some kind of regulation regarding these matters, such as the United Kingdom, it is possible that the delay in regulation is harming the development of these segments in the country's economy. The current government and legislature will likely take steps to regulate part or all of these matters in the near future, with emphasis on sports betting. It is expected that, with the regulation, the main legal uncertainties will be resolved and the development of the market will be paved, with positive repercussions for the agents involved.
Source: Veja
