Hurry up and wait” has long been the modus operandi for those tracking the introduction and implementation of Brazil’s regulated gaming market.
Despite a gaming legalization and regulation process plagued by uncertainty and numerous false starts, Brazil continues to be one of the most anticipated and closely followed markets in Latin America. In recent years, The Innovation Group has worked with clients to size the broader Brazilian gaming opportunity—as well as drill down on specific markets within the country—and the numbers certainly justify the level of interest.
As we outline below, recent movements indicate the sleeping giant that is Brazil’s gaming market may finally be waking up—for some forms of gaming, at least.
Regulated Sports Betting on the Verge
Many industry pundits believed the land-based and online sportsbook market would become regulated and operational by the end of 2022, perhaps even by the time the World Cup was hosted by Qatar in November of last year. The regulations didn’t come to fruition, however, due to a dramatic roller coaster ride of a legislative process that mirrored the drama on the aforementioned pitch.
How did it all unfold? In 2018, former Brazilian President Michael Temer signed legislation (Federal Law No. 13,756/2018) creating the legal sports betting market. Despite this technical legalization, the text of the legislation required regulations be enacted within four years.
Regulations were ready to be implemented by 2022, but Temer’s successor, the now-former President Jair Bolsonaro, refused to sign the regulatory decree during his last days in office. Bolsonaro’s refusal left operators preparing to launch legally in the country in a state of disarray and regulatory limbo. It also meant that the issue was punted to Brazil’s current president, Luiz Inácio Lula da Silva, and legislators.
The drama surrounding sports betting did not end there. This year, numerous reports of match-fixing investigations have culminated in an announcement by the country’s Ministry of Justice and Public Security about the launch of a federal investigation. This came just days after the state of Goias accused several individuals of manipulating the results of soccer matches in 2022 and 2023.
The silver lining of these match-fixing scandals is that they may have served as the catalyst that motivated legislators over the final hurdle for enacting sports betting regulations. In May 2023, the government submitted a provisional measure regulating sports betting to the National Congress. This measure has relatively broad support and can immediately go into effect for a maximum of 120 days, although Brazil’s Congress will need to pass the measure to permanently enact it into law.
Under the provisional measure, the Ministry of Finance will be tasked with regulating the industry. Operators will be taxed at a rate of 16 percent of gross gaming revenues, and players will be subject to a 30 percent income tax on any winnings.
While Brazil has proven time and time again that supposedly “sure thing” gaming-related initiatives can falter in the 12th hour, all signs point toward a regulated sports betting market at long last.
Lottery Transition Slow Going
Since 2020, the lottery market has been transitioning from a nationally controlled model to individual state offerings following a ruling by Brazil’s Supreme Court that the former monopoly was unconstitutional.
While this ostensibly created more opportunities for lottery operators to enter the Brazilian market, the rollout of state-run lotteries has been a mixed bag. States that recently have enacted municipal lotteries and launched tenders in search of operators include Minas Gerais, Federal District, and Porte Alegre, among others.
As some states take advantage of the dissolution of the federal-level monopoly, others are experiencing legislative gridlock similar to that in the national government. Plans in Santa Catarina to help fund a low-income housing program through state lottery, for example, were stalled by the state government in late 2022 due to pressure from lottery opponents.
Along with the rollout of state-level lotteries, the country could see a revival of instant lottery sales. Reporting as of April suggests the government is preparing a decree to bring back their sale as a means to generate new jobs for Brazilians with disabilities.
The Future of Casinos and Integrated Resorts Remains Unclear
Earlier this year, the government’s most expansive effort to bring land-based casinos back to the country stalled due to lack of support.
Senate Bill No. 186/2014 would have enabled the development of both casinos and integrated resorts, allowing for at least one gaming facility per state and up to 35 resort casinos in total. Because the bill had not been addressed by the Senate for four years, it was formally archived.
Despite this outcome, there continue to be calls for casino legislation. The Brazilian Tourism Institute has pushed for casino regulations as recently as February—indicating that land-based gaming development could boost tourism and government revenue.
On top of this, Senate President Rodrigo Pacheco has publicly stated that legalizing casino gaming could be a long-term solution for increasing government revenue. In 2022, the Chamber of Deputies passed legislation that would allow for the opening of integrated casinos, riverboat casinos, and electronic bingo machine halls.
While support for this legislation (Law No. 2234/2022) remains lackluster in the Senate, Pacheco stated that he wants to have the legislation voted on this summer.
Even if 2234/2022 fails, it is almost certain the conversation around casino legalization will not end. In April, lawmakers in the Chamber of Deputies approved request 13/2023 put forward to the Tourism Commission, which urges the government to continue considering gambling reform, even in the face of dwindling momentum.
Although the news related to brick-and-mortar casino gaming in Brazil may be disheartening, recent progress in the sports betting and lottery markets should be viewed as positive, albeit small, turns of the regulatory flywheel. The permanent enactment of sports betting regulations would be a big win if, and when, it happens. More optimistically, it may just be the first domino to fall in broader efforts to move gaming legislation forward.
The Innovation Group will continue to follow the market, tune our models as legislative changes occur, and remain prepared to assist any interested parties in exploring the country’s exciting gaming market potential.
Match-Fixing Unearthed by Soccer Club President
The investigator in the Brazilian soccer match-fixing scandal had to make a tough choice.
The Associated Press reports that the official who helped unearth an alleged Brazilian soccer match-fixing scandal isn’t sorry, even though it involved his beloved Vila Nova soccer club.
When Hugo Jorge Bravo first received information on what has grown to be a huge scandal, he didn’t hesitate before launching an investigation, even though he has been president of the club since 2020.
What he uncovered eventually led to the involvement of Brazilian federal police and the district attorney of the state of Goias, and the lower house of the Chamber of Deputies. So far 15 players in multiple leagues have been charged, including two Vila Nova players. The players, Gabriel Domingos and Marcos Vinicius Alves Barreira, have both had their contracts terminated.
It is alleged that some players were offered between $10,000 and $20,000 to perform actions such as receiving yellow cards and giving away penalty kicks. These actions benefited certain sports bettors.
Bravo told the AP, “It was my duty. From the get-go I said we would not just let it slide; I wanted to get to the bottom of this.
“I never thought this was going to be so big.”
Initially, the investigation targeted three matches that Bravo investigated. Since then, it has grown to include 11 games, with no end in sight.
Bravo’s interest was sparked when someone informed him that one of his club’s players was approached by gamblers to give a penalty to a rival team. However, the player sat out the game, causing the gamblers to threaten him.
Assistant District Attorney Fernando Cesconetto credits Bravo with igniting the investigation.
“If it weren’t for him there would be no investigation,” he told the AP. “What he did was brave. I never heard any club president doing what he did.
“His investigation started at his own club, and without it we would not have gathered so much more in our probe.”
“It was my duty, both as a policeman and a club chairman,” Bravo said. “What could I have done differently?”
Brazil’s RG Advocate Calls for Sports Betting Regs
The Institute of Responsible Gaming is deeply concerned over the uncertainty surrounding sports betting regulation
The Brazilian Institute of Responsible Gaming (IBJR) is concerned that after four years of waiting, there are still delays in the framework for regulation of sports betting, according to SBC Americas.
This comes after a recent smartphone survey showed that 25 percent of the population has already participated in the unregulated market in the form of sports betting apps. IBJR said in a statement that was intended for regulators and lawmakers that it has “deep concerns” over the “uncertain trajectory” of implementing regulations.
“The recent news that the announced Provisional Measure promised for the end of April would be converted into an urgent Bill of Law marked yet another sudden change of course in relation to the plan that the Government Federal had communicated to the market, generating new delays, and insecurity among operators and members of the IBJR,” the statement said.
It added, “Over the more than four years in which we have been waiting for the regulation of the sector and the issuance of operating licenses, since the approval of Law No. 13,756 by the National Congress and its sanction by the president, our optimism with the potential of the Brazilian market has been tested.”
The IBJR is also worried that the high tax rates in Brazil, with an effective rate of 28 percent and a proposed license fee of R$30 million ($6 million), would be one of the highest anywhere. This could make playing on the illegal market more attractive to some, since illegal sites offer more products, such as online casinos, and don’t charge taxes.
The IBJR concluded, “We insist that regulation is the right answer to face the social and economic challenges of this industry. However, regulation must be coherent and must be in line with sustainable, successful international markets that have been operating for decades,” adding, “Brazil is not an attractive market at any cost.”
The survey on the popularity of mobile sports betting was done by media outlet Mobile Time and research platform Opinion Box, according to the Brazilian Report. They interviewed more than 2,000 smartphone users and found that one in four have placed sports bets through mobile apps. Most of these were young men with low incomes.
The survey found that 22 percent of residents in high socioeconomic classes had placed bets on mobile platforms. That number rose to 30 percent among the lower income groups.
Sixty percent of those who placed bets said they lost more money than they won. That percentage rose to 65 percent among bettors in lower income groups.
The most popular sports betting apps in Brazil include Bet365, Betano, Blaze Pixbet, and Sportingbet.
Sports betting apps were legalized in the country in 2018, but regulation of them has fallen far behind.
The administration of President Luiz Inácio Lula da Silva is working on releasing sports betting regulations as soon as possible. One reason is that in April the finance minister estimated that taxing such platforms could generate as much as BRL15 billion ($3 billion) annually.
Muddying the waters of this effort is the recent match-fixing scandal in the country’s soccer league and the fact that all of the top clubs are sponsored by sports betting companies.