"Some of these companies were not approved because their authorization requests were deficient. For example, of the 100 documents required, some submitted only 20," says Regis Dudena, Secretary of Prizes and Betting, in an exclusive interview with EXAME Magazine.
About to complete one year in office, the secretary was emphatic in saying that the government is not obliged to grant operating authorization to any company and that the management makes a cautious assessment.
"If we have enough elements to, for example, have legitimate doubts regarding the conduct of this company, the suitability of this company or the illegal behavior of this company, we may not grant this authorization based on this provision of the law," he says.
Regarding the challenges for the first year of regulation, Dudena does not give a deadline for all unauthorized betting houses to be offline and says that a joint effort with financial institutions and the Central Bank is necessary to strangle the illegal ones.
"Taking down domains will be necessary, but it will have to be complemented. This alone will not prevent illegal companies from operating in Brazil," he says. "We are trying to identify a way to block the use of Pix to send money abroad," the secretary states.
Regarding the revenue expected from the taxation of bets and the measures to tighten regulation to respond to the increase in bets among the poorest, the Secretary of Finance states that it is necessary to wait for the data from the sector to understand the size and where bets are going in Brazil.
"I imagine that, after the first year, we will have enough data to assess the impact of the measures and, if necessary, promote changes. We are attentive to correct restrictions that are not effective or reinforce rules in areas that require greater control," he says.
EXAME - What has changed in practice with the regulated market as of January 1, 2025?
Regis Dudena - What we call the “regulated market” has truly begun. In practice, the biggest change is that in order to operate nationally, the company must be authorized by the Ministry of Finance.
This ensures that the companies that provide the service are Brazilian, even if their partners are foreign. They must be headquartered in Brazil, have well-known directors and use financial institutions regulated by the Central Bank.
Another important point is the rules created in 2024. We regulate topics such as: the system that companies must use; which games can be offered; how the financial operation must be structured; rules to combat money laundering; and rules to protect gamblers, especially those related to mental and financial health. From now on, we know who provides the service and how it is offered. We also have a monitoring and inspection ordinance, in addition to another for sanctioning processes, in case of infractions.
What are the sanctions for those who do not respect the rules?
They start with a warning and, at the worst, go as far as revocation, that is, losing the authorization. It is not just suspension: they can actually lose the authorization. Obviously, there must be proportionality between the conduct and the penalty. If the company has done something bad to the point of being revoked, it will lose its authorization and will be banned from operating in Brazil. If it is something superficial, the first time it does so, it will receive a warning. However, if it is repeated, even if it is a minor misconduct, it can escalate and lead to revocation. The fine is also another important point. Fines can reach up to R$2 billion (US$ 324m).
How will the issue of state lotteries and the Loterj case be handled?
A decision by Minister André Mendonça expressly stated that Loterj is prohibited from providing services outside the state of Rio de Janeiro. This ends the discussion about the possibility of a state lottery operating nationally based on a local authorization.
The interpretation of the text of the law and the Brazilian Constitution, which always seemed very clear to us, was confirmed by the Supreme Court. What the Supreme Court decided is that there is a federal law and a national regulatory body, which is the Prizes and Bets Secretariat of the Ministry of Finance. Only this body can grant authorizations for national operations. This decision by the STF reinforces that state lotteries can only operate within the limits of their state.
What about advertising by companies that only have state authorization?
The law makes it clear that advertising by state lotteries is restricted to the state territory. If a company wants to sponsor a club that operates nationwide, it needs authorization from the Federal Government. This decision brings legal stability to the sector. Of course, there may still be discussions in the STF plenary, but this initial position gives us a very solid basis to ensure that the rules are followed and that everyone operates legally within the permitted space.
By 2024, only 66 had been authorized. What about the nearly 30 companies that did not receive authorization?
For a company to operate until December 31 of last year, during the adaptation period, it necessarily needed to have requested authorization by the publication of the adaptation ordinance on September 17. In other words, those that requested it by August 20 should have received a response in 2024. Those that requested it by September 17 could operate in compliance until the end of the year.
What is important now is that, as of January 1, 2025, only companies with authorization can operate nationally. This is definitive. If a company requested authorization and had its request denied or is still under analysis, it cannot operate. Without formal authorization granted, whether definitive or provisional, the company is prohibited from operating. And, if it is found to be operating, its website will be taken down.
Will the Secretariat take into account if a betting house is awaiting the authorization request and is operating illegally?
If a company is operating illegally, that is, without authorization, and is in this approval process, it is illegal. This will be taken into consideration. Here is something important, something that is not clear to everyone: the law determines that the act of granting authorization is a discretionary act of the Ministry of Finance, taking into account the public interest.
What does this mean?
It means that we are not obliged to grant authorization to anyone. If we have sufficient elements to, for example, have legitimate doubts regarding the conduct of this company, the suitability of this company or the illegal behavior of this company, we may not grant this authorization based on this provision of the law. It is important even for the companies that are being evaluated to be clear about this: if the company is without authorization and insists on providing the service, this will be taken into consideration. And this may possibly result in it not obtaining this authorization due to this behavior.
What were the main reasons that led some companies to not obtain authorization?
Some of these companies were not approved because their authorization applications were deficient. For example, of the 100 documents required, some only submitted 20. When notified to provide additional information, they did not provide the necessary documents, so the cases were archived.
In addition, we had a smaller group of companies with issues of suitability. This information came from monitoring and inspection areas or from partners such as the Federal Police and the Federal Revenue Service.
What we do is not prejudge, but rather a cautious assessment: if there are legitimate doubts, we prefer not to grant authorization. Finally, there is a group under analysis because they made significant changes, such as changing partners or even their CNPJ and name. When this happens, the process is extended and, in practice, they return to the end of the line. These companies still have to wait for the conclusion of the process to be able to act.
How does the Secretariat deal with illegal websites that had their domains taken down, but that can go back online?
Does the government believe that the mechanism they created at the end of last year will be enough to prevent these unauthorized sites from continuing to operate? I would say that taking down domains will be necessary, but it will have to be complemented. That is not the only way we will be able to prevent illegal companies from operating in Brazil.
Here, there is one thing: the existence of authorized and legal companies tends to lead bettors to bet on those companies. If I have a doubt about whether a company is serious or not, and I know that one of them is authorized by the Ministry of Finance, the tendency, on average, is for bettors to prefer those that are authorized. So, that is the first step. The existence of a legalized market is a good start for us to know how to deal with it and for bettors to know where to bet more safely.
And what is the next step?
We will continue this tracking and we will continue taking down these sites. You are right when you say that there is a possibility that they will reappear with another domain. But that becomes costly for them, because eventually they lose their customer base and the ability to make their brand prevail in the market. Typically, these companies that keep changing domains are more fraudulent than those that want to establish themselves in the market.
And what about the role of the financial system?
In article 21 of Law 14.790, there is a very important provision that prohibits financial institutions and payment institutions from having relations with unauthorized betting houses. We are working together with the Central Bank on mechanisms to make financial service providers, FIs (financial institutions) and IPs (payment institutions), stop providing services to these betting companies that do not have authorization.
With the ordinances and the list of authorized companies released, does the Treasury have a forecast for when the illegal websites will stop operating?
I would like to be able to say that in two weeks we will not have any unauthorized websites operating, but we know that it will be a constant challenge. New companies are bound to emerge, and we will need to monitor and inspect them all the time. The Central Bank also needs to act in their area. The tendency is that, over time, the economic incentives to operate illegally in the country will increasingly diminish.
How does the illegal betting market compare to others that operate in Brazil?
It is important to understand that the legalized market creates direct competition with illegal companies. There is a difference in relation to other types of illegal market, such as streaming or cable TV, where the product offered by illegal companies is the same, only cheaper.
In the case of betting, the economic incentive to bet on an illegal company is not so evident. When a bettor bets at an authorized bookmaker, he or she has much more guarantees that his or her rights will be preserved, that his or her mental and financial health will be protected and, most importantly, that he or she will receive the prize if he or she wins.
With illegal companies, however, the bettor exposes his or her finances and mental health and has no guarantee that he or she will receive the prize. So, what we believe is that, over time, operating illegally will become less and less viable, both due to the regulator's actions and the market's adjustments. But we know that this will be a task that requires ongoing monitoring.
Is there a revenue forecast for 2025?
We do not yet have an exact forecast, because we do not know the total volume of resources that the market will generate. Now that we have started to receive financial data from the companies, we will be able to better estimate the annual revenue. We still have a high number of companies with pending authorization requests. Some of them should be authorized early this year, which may generate new grants. There is a continuous flow of requests, so revenue will also continue to occur over time.
With the discussion about the increase in gambling among the poorest, sectors of society and members of parliament say that the regulations need to be reviewed. How does the secretariat view this issue?
We have always been clear that regulation is something that needs to be monitored. It is not something that is set in stone, created once and cannot be changed. What we intend to do now is observe how the market will react to the rules we have implemented and assess whether they are working as planned. We make decisions based on clear reasons and specific tools to mitigate problems identified in the sector. We are confident that we have hit the mark, but we know that situations may eventually arise that will require adjustments.
The legislature has indicated that banning gambling could be a solution. What is the secretariat's position on this?
It is not the secretariat's role to say that the legislator cannot or should not address the issue. What we can do as regulators is to study, monitor and, if necessary, technically point out what works and what does not. Regarding the total ban on gambling, our reading is that an absolute ban would simply push demand to the illegal market. We have seen this happen in other places, and we have a history of it not working.
Do you believe that we will have enough data this year to understand the sector?
I imagine that, after the first year, we will have enough data to assess the impact of the measures and, if necessary, promote changes. We are vigilant in correcting restrictions that are not effective or reinforcing rules in areas that require greater control. Regulation needs to be dynamic, following the market and responding to its needs in a technical and efficient manner. This will only be possible with patience and the use of concrete data to support any future decision.
Source: EXAME
