The much-anticipated Ordinance SPA/MF No. 827, which sets out rules and conditions for the commercial exploitation of sports betting and online gaming in Brazil, was published on May 22, 2024. Surprisingly, as of the publication date of this article, only one betting company has requested authorization from the Ministry of Finance to operate in the country. But the surprise has an explanation, which can be summarized in two words: legal uncertainty.
To understand this legal uncertainty, we could go back to 2018, with the publication of Law No. 13.756/18. But very little (or almost nothing) was done in terms of regulating sports betting, a market that reached approximately R$150 billion (US$ 28bn) in 2022. So, let’s move forward to 2023.
On October 27, 2023, the Ministry of Finance issued Normative Ordinance/ MF No. 1330/2023, establishing a 30-day period for companies interested in operating fixed-odds betting in Brazil to submit a preliminary expression of interest. In that short period, 134 companies expressed interest, highlighting the strong market potential for sports betting in the country.
However, again the regulation process did not advance quickly. It was only in April 2024 that the Ministry of Finance published an ordinance with a detailed schedule to regulate the online prizes and betting market. The expectation was high, as companies eagerly awaited clear rules to operate in Brazil. However, the slow regulation created an environment of uncertainty and legal insecurity, negatively impacting companies' interest in proceeding with their operations in the country.
Ordinance SPA/MF No. 827 was published only on May 22, 2024. This document was highly anticipated by the sector and is essential to define the functioning of the sports betting market in the country. According to the Ordinance, those interested in operating in the Brazilian betting market can register at any time.
However, those who wish to start their operations in 2025 must request authorization by August 20. The approved companies will be notified by November 18, and the necessary grant to operate in the country must be paid by December 18. Thus, on December 31, all authorizations will be granted, allowing operators to start providing their services in the country from the beginning of the new year.
However, the delay in publishing the Ordinance led to several consequences, including the intensification of state regulations. During the waiting period, some Brazilian states took the initiative to intensify the licensing of betting houses at the state level. A clear example is the state of Rio de Janeiro, where Loterj, the state government lottery authority, has already licensed five sports betting houses, and another seven are in the process of being licensed. This movement created an alternative for companies seeking to operate in the Brazilian market without relying exclusively on federal regulation.
The license granted by Rio de Janeiro allows betting houses to operate throughout the national territory, creating a conflict with the Union. At the end of March, the Ministry of Finance requested that Loterj modify parts of its public notice so that the authority would stop licensing companies for national operations.
The companies registered in Rio de Janeiro follow rules that, in some aspects, diverge from federal rules. One of the main differences is the cost of the license to operate: while the Union requires a payment of R$30 million (US$ 5,6bn), the state government of Rio de Janeiro charges only R$ 5 millions (US$ 930k). The gambling is being played with different rules for each side.
This discrepancy creates an uneven playing field and, obviously, legal uncertainty. The lack of agreement between the states and the federal government led the issue to the Supreme Federal Court (STF) through Direct Action of Unconstitutionality (ADI) 7640.
Proposed by the governors of São Paulo, Minas Gerais, Paraná, Acre, Mato Grosso do Sul, Rio de Janeiro, and the Federal District, the ADI questions two main points of the legislation. First, the second paragraph of Article 35-A of Law 13.756/2023, which limits a concession to an economic group or legal entity to only one state or the Federal District. Second, the fourth paragraph of the same article, which restricts the targeting of advertising to individuals physically located in the states.
The governors argue that these limitations reduce the number of bidders and may foster undesirable competition between states. Smaller states, with fewer inhabitants and, therefore, a smaller potential market, could be particularly disadvantaged, being forced to quickly issue their own licensing processes to attract large companies.
The federal government's delay in regulating the sports betting market also delays the collection of significant revenues that could be obtained from the operations of these companies. This delay not only harms the country's economic potential but also creates an environment of uncertainty for investors and betting operators.
The legal uncertainty generated by the delay in publishing federal ordinances is one of the main factors explaining why only one betting company has requested authorization from the Ministry of Finance to operate in Brazil so far. Companies are reluctant to invest in a market that still lacks clearly defined rules and presents conflicts between state and federal regulations. This situation highlights the urgent need for a clear and efficient regulatory framework for the sports betting sector in the country.
Fernanda Soares
Lawyer, Master in Sports Law from the Pontifical Catholic University of São Paulo (PUC/SP), Specialist in Sports Business from the Center for Studies in Law and Business (CEDIN/MG). Internationalist from the Pontifical Catholic University of Minas Gerais (PUC/MG) and specialist in International Business from the Pontifical Catholic University of Paraná (PUC/PR).
Specialist in Privacy and Personal Data Protection. Partner at AK Direito na Comunicação e no Esporte, leader in Privacy and Personal Data Protection. Member of the Sports Law Commission of the Brazilian Bar Association, Minas Gerais Section (OAB/MG). Collaborating member of the Sports Law Commission of the Brazilian Bar Association, Espírito Santo Section (OAB/ES).
