Faced with a rapidly growing market in the world, Brazil faces the challenge of regulating online betting platforms, the popular ‘bets’ as they are called in the country, mainly associated with football games.
The government finalizes the rules that will formalize the sector in the country from January 2025, including the provision for tax collection approved in Congress.
The experience of other countries that have done this before indicates that the government can in fact reap billions in revenue from this regulation, but also that the establishment of control rules and safeguards to minimize risks can generate jobs and business.
The trend should be for small companies in the sector to be acquired by larger companies and even global giants, which may be even more attracted to the promising Brazilian market.
The numbers are attractive. According to estimates from the Statista data platform, online betting will generate no less than US$45 billion worldwide this year, reaching US$65.1 billion in 2029, an annual growth of 7.4%.
In Brazil, assessments are carried out by national consultancies, so the numbers should not be compared. The estimate is that online betting will total R$120 billion (US$ 21.5bn) in 2023 and could reach R$150 billion (US$ 26.8bn) this year, indicates Ricardo Bianco Rosada, from brmkt.co, a strategy and business development consultancy.
But the numbers are just an estimate, since even the total number of companies operating in the country is imprecise: it varies between 200 and 1,200, depending on the source. Only when the market is regulated, with bets based in the country, will it be possible to reach a number closer to reality. Still, experts point to the Brazilian market as very attractive for betting.
Analysis of numbers from countries such as the United Kingdom, Italy and Spain confirms the government's expectation of significant tax collection, but also highlights the creation of vacancies for customer service, website operation and technology professionals.
These are positions that must be internalized with the obligation for bets to establish themselves in Brazil. Until now, they operated from structures abroad.
“The rules bring legal security to investment, guarantees for bettors and a search for responsible gambling. And, of course, new tax resources,” says Ricardo Bianco Rosada, from brmkt.co.
The United Kingdom is seen as a benchmark for the formalization of online betting. Nineteen years after regulation, tax collection reaches 4 billion pounds per year.
British ‘bets’ have a 15% tax rate on the so-called Gross Gaming Revenue (GGR), which is the platforms' gross revenue after paying prizes, but there is no income tax for winning bettors.
With strict rules and monitoring of suspicious activities, the United Kingdom has banned, for example, players or referees from betting on football. Athletes also cannot pass on any information to people who could benefit from betting, such as their team's lineups. Authorities discuss a new advertising code for betting.
The country has more than 60 thousand direct jobs linked to the sector, made up of 1.6 thousand betting sites, but this number has already exceeded 2.4 thousand. Another trend that international experience shows is this concentration of a market that is currently very dispersed.
Experts point to mergers in countries with older regulation, such as Spain and Italy, that created large global corporations in the sector.
In 2020, for example, British companies Flutter Entertainment and The Stars Group joined forces to form the largest online betting company in the world, with brands such as PokerStars and Sky Bet. It is estimated that 400 bets operate globally, of which 25 are already considered giants.
Legal limbo
The same movement is expected in Brazil. With the market not yet regulated, the number of companies is imprecise: it varies between 200 and 1,200, depending on the source.
“Maintaining a bet requires a large investment in technology, cybersecurity and marketing. The expectation is a consolidation of the market in Brazil and the world, with smaller companies being bought or merging,” says lawyer Caio de Souza Loureiro, partner in the Gaming & eSports area, at TozziniFreire Advogados.
In Brazil, a 2018 law determined that online betting would be a type of lottery, but no additional rules were created, which left the activity in a kind of legal limbo.
The recently approved federal regulation stipulated a rate on GGR of 12%, and bettors must pay 15% on prizes as Income Tax. Bets must operate in Brazil and pay a grant of R$30 million (US$ 5.35m) to operate for 5 years.
The Ministry of Finance is working on a new ordinance for the sector, which should be published soon, considered essential by bets so that they can estimate their profits in a new regulated market scenario.
The document will also establish whether crash games (such as the Aviator game) and slots (such as the Fortune Tiger game) will be able to work in Brazil, as long as the sites present the bettor with a table predicting progressive gains throughout the game.
In other countries, these two types of online games generate most of the sector's earnings. For some bets, it may not make sense to pay the concession to stay only on the sports field.
In countries that have already advanced, control models differ. In Canada, regulation began in 2021 and, in the USA, in 2018. In both states, states can create their own rules for online gambling.
In Latin America, Colombia took the lead in 2015 with website operating and taxation rules but chose to create a federal supervisory body. In Argentina, this is up to the provinces.
In Spain, betting revenue has tripled since regulation in 2011. In the country, betting is taxed at 20%. In countries where there are federal rules, a large part of the revenue goes to health. Where there are state rules, the money generally finances infrastructure, education and combating poverty.
In Italy, the rules are also from 2011, but there are new projects under discussion, such as creating a fee for bets to finance the treatment of young people addicted to betting. A similar idea is being debated in the United Kingdom. In Germany, where the rules are from 2021, fears of fraud have led to a ban on betting on ongoing games and it is only possible to bet on the final result.
In Brazil, a July ordinance determined that betting platforms will have to identify, qualify and classify the risk of bettors, pointing out patterns that may indicate abusive use. In addition, bets will have to report suspicious transactions to the Financial Activities Control Council (Coaf), which combats money laundering.
Pandemic accelerated sector
Among the factors that helped boost online betting on the planet, experts point to the social isolation of the pandemic and the advancement of smartphone technology and payment methods. Here, Pix helped boost this behavior even further.
To discourage abusive use, countries such as Spain and Italy have already limited the sponsorship of bets on football team shirts. In Brazil, 19 of the 20 Serie A clubs have a bet as a sponsor, but limits in this area should only happen later, say experts based on international experience.
It is a segment still undergoing transformation, says Heather Wardle, professor at the University of Glasgow, Scotland, specialist in sports betting and author of the book “Games without borders”:
“The recent development of online games has to do with the change in technological infrastructure, which has given rise to a multi-billion dollar entertainment product. Games reflect broader social trends, reaching a previously unknown scale.”
Mariana Tumbiolo, partner at Madruga BTW Advogados, says that the Brazilian potential is enormous. According to the lawyer, there are estimates that the market could reach something between 1% and 2% of the Gross Domestic Product (GDP).
The Minister of Finance, Fernando Haddad, estimated that, this year, at least R$2 billion (US$ 358m) would enter the public coffers with the regulation, but so far only three companies have filed a grant request and delivered the documents to the Treasury: Superbet, Kaizen Gaming Brasil, owner of the Betano brand, and MMD Tecnologia (Rei do Pitaco).
In addition to these, the Betting Management System records another four in the process of sending documentation. Each order can include up to three brands and must be made by August 20th. Authorizations will be issued by the Secretariat of Prizes and Betting (SPA) by the end of the year, so that the regulated market will begin operating on January 1st.
Source: João Sorima Neto / Ana Flávia Pilar — O Globo
