Since the publication of Law No. 14,790 on December 29, 2023, which regulates fixed-odds betting and online [games of chance], there has been a recurring question regarding the classification of online gaming and which modalities may be operated in Brazil post-regulation. Amidst this uncertainty, it is important to elucidate and simplify the analysis of the legality of a modality in relation to what the regulation entails.
This is because the Brazilian legislator, when drafting Law No. 14,790 of 2023, chose not to segment and legalize specific modalities of online games of chance. On the other hand, parameters and requirements were defined to which online games of chance must adhere to be certified and authorized for distribution in the country.
The lawful gaming modalities will be those that meet the requirements presented in the law and, eventually, in future regulations, as well as being obligatorily operated in a virtual environment.
First and foremost, it is important to identify the essence of the regulation of the betting and online gaming sector: fixed-odds are a fundamental requirement of any modality to be offered in the regulated environment. In any option of betting or online game, at the moment of placing the bet, the user is presented with the multiplier factor of the amount wagered in case of a correct forecast and consequent prize (Law No. 13,756 – Art. 29, § 1; Law No. 14,790, art. 2, item II).
In practice, in a slot game eligible to be operated in Brazil, the operator must demonstrate, in the interface and rules of the game, the multiplier factor corresponding to each of the possible winning combinations, the fixed odds for each winning sequence. When entering the game, the user must be informed and provided with a "template" showing how much will be paid for each of the combinations, including the maximum and minimum winnings for each sequence.
In crash games, the fixed-odds are more easily identifiable in the online gaming event. As a rule, the operator only defines the minimum and maximum values that the algorithm can reach in each round, which are fixed as rules of the game – e.g., the game's dynamics start at 1.01x and reach up to 999x. However, the fixed odds themselves in this modality can be chosen by the user, by defining the auto cashout multiplier – the maximum and reference multiplier of how much the player can win in case of a correct forecast.
In a standard crash game, the player either sets the auto cashout at a value of interest, or adopts the maximum reference value of the game as the fixed odds, which are multipliers of "how much the bettor can win", the player's potential winnings, as per Art. 29, § 1, of Law No. 13,756, of 2018. However, during the dynamics of the game, the player may choose to withdraw prematurely and, eventually, receive a smaller amount than the fixed odds, without disqualifying the fact that the user knew and was informed of the maximum they could win when placing the bet.
In the event that the player chooses the auto cashout multiplier at 25.0x, for example, the fixed odds (maximum potential winnings) are defined at this value, meaning the player's potential gain in the round. If, during the game dynamics, the user believes that the multiplier has reached a satisfactory value, even lower than the chosen reference, and decides to withdraw at 10.5x, for example, this player's option does not change the fact that the fixed odds defined for that round were 25.0x.
If there are deeper concerns regarding the identification of fixed odds in crash games, for the sake of greater security in compliance with regulations, the operator can adapt the modality so that the choice of an auto cashout multiplier is mandatory for the user upon entering the game. This would be a way to reinforce the presence of a fixed odds defined by the player themselves, even though the maximum winnings value is already stated in the rules and can be identified as the game's fixed odds.
The second requirement represents one of the most significant and important elements for the online gaming industry, which is the randomness or unpredictability of the round's or game event's outcome, guaranteed by a Random Number Generator, symbols, figures, or objects, as per Article 2, Section VIII, of Law No. 14,790, of 2023.
This randomness is one of the fundamental principles of the gaming contract since its inception, when the activity was conducted in physical environments, or even without technological components, and gained more prominence with the application of technical regulation in the gaming sector.
The regulatory conduct and the objective underlying this requirement are allocated in the necessity for the game's outcome to be effectively unpredictable and completely independent of external interferences or influences on its dynamics and the outcome itself. This requirement is inherent even to the entertainment of the game because predictability or prior definition of the outcome removes the thrill of games of chance, where the "intervention of luck" is expected.
Most online games of chance operated nowadays function based on a Pseudo-Random Number Generator (PRNG), as a pure Random Number Generator (RNG) still encounters technological development barriers.
The widely used PRNG can be described as a computational deterministic algorithm that does not produce a purely random event but demonstrates enough randomness in its results to be approved in industry tests and parameters to classify a game as effectively random, which are acceptable both by regulators from other jurisdictions and by international self-regulatory entities.
The Pseudo-Random Number Generator used in online games of chance needs elements to ensure greater security and reliability in the outcome, mainly due to the possibility of external interference through invasions or hackers.
Therefore, games of chance are commonly protected by strong encryption in their dynamics and presentation of the outcome, meaning these software become more resistant to attacks aiming to manipulate the outcome or detect technical limitations of the PRNG itself, such as identifying patterns of repetition or matrix.
To reinforce the security of the Pseudo-Random Number Generator, constant monitoring of PRNG execution in various presentation states is recommended, meaning the variability of execution of the pseudo-random event within the defined software matrix of possibilities. Furthermore, the numerical starting point (seeding) of the PRNG should vary over time, in recurring variations, to avoid potential matrix mapping by technical invaders or monitoring programs.
In other words, it's like considering a professional athlete running a 100-meter race; the constant variation of seeding would equate to changing the athlete's starting and ending points on the track. Thus, in the first race, the athlete would start at point zero, in the second race at 137 meters, in the third race at 221 meters, and so on. Consequently, the initial term of the pseudo-random event contributes to the more adequate execution of the game's dynamics endowed with true randomness, allowing for the best achievement of games based on security, honesty, and reliability parameters for both the player and the sector as a whole.
It can be said that the second requirement, regarding the essence of randomness in online games of chance, goes beyond the simple use of a Pseudo-Random Number Generator and also encompasses the prohibition of using tools and functions that may assist in inhibiting or manipulating the operation of the PRNG.
These recommendations are substantiated in the obligation that the dynamics and outcome of the game are exclusively based on the result of the PRNG and cannot be subject to a secondary or subsidiary alternative result after the PRNG presents the winning numerical set of the game. Thus, the operator itself must be subject to the results presented by the PRNG, without making any adjustments or subsequent interference after the presentation of the outcome.
3. Analyzing the game
With the requirements presented, the analysis of a potential compliance of a gaming modality regarding the regulations of the gaming and betting sector in Brazil begins with the following questions, which should be answered with a 'yes':
If the game is indeed operated solely in a virtual environment, with a clear fixed odds defined and informed to the bettor and subject to a result determined by an RNG, the modality meets the fundamental requirements for classification as an online game, based on Laws No. 14,790 of 2023, and 13,756 of 2018.
It is important to remember that once these criteria are observed, the definitive analysis of the game lies with the Ministry of Finance, and the modality will be subject to compliance with other requirements defined for a certification process by a specialized laboratory, and the details of this authorization can be discussed with a trusted lawyer of the operator.
Filipe Senna
Partner at Jantalia Advogados, Master of Laws in Gaming Law with a focus on online games of chance.
