A common practice in the betting industry is to offer the customer an account within the platform, allowing him to contribute certain amounts at once to make different bet payments with the balance of his virtual account. In this way, both the payment of bets and the receipt of prizes are carried out through a discount or availability of balance within the account on the platform.
As it is a graphic representation of the value available to the customer, the offer of this account on the platform is, several times, offered by the betting company itself, or by a third party service provider, which may or may not hold an authorization from the Central Bank to offer a transactional account.
With the new provisional measure (PM) for sports betting, this scenario will possibly change. Article 34-A was introduced as a way to ensure that transactional accounts are offered only by institutions authorized to operate by the Central Bank.
According to the rules applicable to the financial sector, transactional accounts correspond to deposit accounts (offered by financial institutions) or payment accounts (offered by payment institutions), the latter being the modality that could best fit the industry, considering the nature of the service and the lower regulatory cost involved.
The impact of this change for betting companies is considerable, as deposit or payment accounts require compliance with a regulatory framework issued by the National Monetary Council and the Central Bank, which includes compliance with KYC (know your customer), money laundering prevention, fraud prevention, compliance with cybersecurity rules, among other points.
This whole structure demands control operating costs, in addition to the need to hold minimum capital, and equally satisfactory shareholders' equity according to the rules issued by the authorities. Obtaining an authorization from the Central Bank to operate as a payment institution currently takes around 12 months.
By confirming this obligation in the final text of PM 1,182, there will be a greater demand in this industry for obtaining authorizations to operate in a regulated manner.
In order for companies to be able to offer services without necessarily submitting to the typical rules of an authorized firm, some alternatives that can be analyzed, such as the acquisition of an already authorized payment institution, whose process could take up to 1 year, or the establishment of partnerships with authorized institutions that offer Banking as a Service (BaaS) payment accounts, which seems to be the most immediate solution, since the process would involve a period of negotiation with the BaaS provider and operational integration.
It is worth mentioning that there are proposals currently being discussed by the Central Bank, which in the future could potentially serve as an alternative to betting companies. In the context of payments made by Pix, the figure of the Payment Manager, who would receive funds from a payer in favor of the final recipient without being an authorized institution, is being evaluated.
At the moment, the figure in question has not been created, so changes in the BCB framework must be accompanied by betting companies, in order to assess potential alternative solutions.
In any case, as PM 1,182 will have the force of law, even regulatory alternatives presented by the Central Bank will not necessarily serve to offer services involving the sports betting industry. In view of this, it is worth monitoring the developments and eventual modifications of the text involving its approval and conversion into law.
Paulo Brancher
Partner of Mattos Filho
Flavia Theresa Sassatani Vazzolla
Lawyer for Mattos Filho
