Request for suspension
Last Tuesday (12), the Office of the Prosecutor General of the Republic (PGR) filed a Direct Action of Unconstitutionality (ADI) with the Supreme Federal Court (STF) against laws 14.790/2023 and 13.756/2018, which authorized and regulated the ‘Bets’ – as operators are locally called - in Brazil. Additionally, the action targets ordinances issued by the Ministry of Finance that regulate the fixed-odds betting modality.
According to the PGR, fixed odds refer to bets related to "real or virtual events where the amount a bettor could win is defined at the time the bet is placed." If the STF accepts the request, betting companies will be prohibited from operating in Brazil.
"If the Supreme Court recognizes the unconstitutionality of the provisions that established and regulated the new modality of fixed-odds betting based on sporting events and online events, the activity will no longer have authorizing normative support, and its practice will be considered illegal under national law," stated the PGR.
Why could the suspension occur?
According to the Office of the Prosecutor, the laws fail to meet "the minimum requirements for the preservation of assets and values of the Federal Constitution" by allowing "the indiscriminate exploitation and promotion of virtual betting systems based on sporting events (sports betting or bets) and online gaming events (virtual betting houses)."
"This new market emerged without criteria to protect service users and the national market, a situation worsened by the fact that websites and operators are often based in other countries, meaning Brazilian legislation does not apply, making control, oversight, and taxation difficult," the PGR stated.
Paulo Gonet, the Prosecutor General of the Republic, stated that "the legislation is insufficient to protect fundamental consumer rights, given the predatory nature of the virtual betting market." Additionally, he noted that the legislation affects "social rights to health and food, consumer rights, property rights, and the rights of children, adolescents, the elderly, and people with disabilities."
"It clashes with principles of economic order and the domestic market and with the State's duty to protect family unity. Furthermore, it disregards the constitutional requirement for public service concessions or permissions to be granted through bidding processes. It also deviates from constitutional restrictions on advertising high-risk products for health," argued Gonet.
Immediate adjustment
This Monday (11) marked the first day of a public hearing to discuss betting companies in Brazil, convened following an ADI for which Minister Luiz Fux of the STF is the rapporteur.
The next day, Fux stated that "the law regulating betting needs an immediate adjustment" and that "the judgment of the action questioning the constitutionality of the norm must be conducted urgently." According to him, a conclusion on the matter should be reached in the first half of 2025.
Bolsa Família
On Tuesday, Fux also ruled that the Brazilian government will prevent beneficiaries of social programs from using resources from Bolsa Família and BPC (Continuous Cash Benefit) to place sports bets. The decision was published on Wednesday (13), along with the prohibition of advertising and marketing directed at children and adolescents.
"It is evident that the current scenario of insufficient protection, with immediate harmful effects, especially on children, adolescents, and the family budgets of social program beneficiaries, constitutes manifest periculum in mora (danger in delay), which must be immediately addressed," said Fux.
A study conducted by the Central Bank revealed that Bolsa Família beneficiaries spent R$ 3 billion in ‘Bets’ via Pix in August. This amount represents 20% of the total distributed by the program that month. Of the 20 million beneficiaries, 5 million placed bets last month, spending an average of R$ 100 per person. However, the data does not indicate how much was received back by bettors in the form of winnings.
History of betting in Brazil
In 2018, a law approved during President Michel Temer's administration allowed the operation of sports betting websites in Brazil. In 2023, under President Lula's administration, Brazilian legislation was amended to regulate the ‘Bets’. In December, Law 14.790/23 was enacted, and according to it:
* Private companies can operate both online and in physical establishments: until December 2023, sports betting in Brazil was only allowed at lottery houses and controlled by the federal government. Starting January this year, however, any private company can operate sports betting, whether digitally or in a physical space.
* The minimum age for placing sports bets increased from 18 to 21 years.
* Advertising or any type of marketing directed at minors was prohibited.
* Bettors must have their identity verified and validated.
* Betting companies must implement policies to prevent money laundering schemes and promote responsible gaming.
Betting regulation in Brazil
It is also important to note that in 2023, Provisional Measure (MP) No. 1.182/2023 was issued, amending Law 13.756/18. Among other changes, this regulation allows greater oversight of the sports betting sector. See below:
- Oversight: Betting companies must purchase a license to operate in Brazil. Consequently, a new secretariat has been created within the Ministry of Finance to accredit the companies after analyzing their documentation. If approved, the government will monitor the volume of bets and the revenue of the institutions, ensuring greater control over this market.
- Legality: Companies approved through the above process and holding valid licenses can accept bets on sporting events. These events, however, must be official and organized by federations, leagues, or confederations. Betting companies that commit infractions may be fined between 0.1% to 20% of their revenue, depending on the severity of the violation.
- Taxes: Players with winnings above R$ 2,112 will need to pay 30% on that amount, the same tax rate applied to lottery prizes. Betting companies, on the other hand, will be required to pay an 18% tax on Gross Gaming Revenue (GGR), which is the revenue from all bets placed, minus prizes paid to players and taxes on legal entities. Companies in the sector, like any others, must also pay additional taxes: PIS, Cofins, Income Tax, CSLL, and ISS.
- Money Laundering: Betting companies must implement strict control and effective monitoring systems to prevent money laundering. They must submit information about bettors to the Financial Activities Control Council (Coaf).
Betting companies will also need to promote awareness campaigns about gambling addiction to prevent dependency and ensure the mental health of bettors.
Source: inplaySoft
