Brazil’s Latest Gambling Ruling – What Can Be Learnt?

Brazil’s Latest Gambling Ruling – What Can Be Learnt?
Simon Wooldridge
by Simon Wooldridge Last updated:

The UK has a long-established online gambling industry. It’s been heavily regulated since 2005 and a licence from the UK Gambling Commission (UKGC) remains among the gold standard of gambling certifications. 

Still, the UKGC is making changes to the gambling framework in the UK. Just last year they announced plans to introduce financial risk checks, which was met with mixed opinions from within the gambling industry and customers alike.

In Brazil, the online gambling industry is much younger, so change and even volatility is more likely at this stage in the industry’s development. In fact, it’s only been a few months since Brazil’s Chamber of Deputies voted to approve Bill 2,626/2023. 

This bill was passed to tighten and properly regulate online gambling. Until then, it was possible to place fixed odds wagers on sports or partake in state-run lottery and bingo games but all placed with offshore or completely unregulated operators.

The passing of this bill is a landmark moment for Brazil, with amendments and additions to follow. 

Let’s consider some of the amendments that will come into force by October 2024 and what this could mean for Brazil’s betting landscape.

Removing Free Bets and Bonuses 

The most unexpected amendment was the decision to ban wagering incentives such as bonuses and free bets. The law states: 

“It is forbidden for the operating agent to grant, in any form, an advance, anticipation, bonus or prior advantage, even if merely for promotion, publicity or advertising, for the placing of bets.” 

It couldn’t be clearer, but what does it mean for Brazil’s gambling industry?

Move to Offshore Operators

For many bettors, promotional incentives can be a deciding factor in which online gambling site to choose. A law prohibiting licensed platforms from offering incentives could provoke a shift towards offshore or grey market operators. Reining in consumer choice in this industry in the name of protecting those consumers can have negative consequences, as seen recently in mainland Europe.

The potential to generate revenue was one of the most prominent factors in Brazil's decision to legalise gambling platforms. However, this additional move to remove bonuses could seriously hamper the ability to generate the best returns from a newly regulated market. After all, many companies already accept wagers in Brazil and if they can continue to do so whilst offering bonuses, it’s perhaps less likely that they’ll seek to join the regulated market. Thus, they won’t be paying taxes in Brazil on their earnings.

Lack of Protection for Consumers

As well as the potential for the government to lose out on income, there’s another, even riskier, problem that could arise. Perhaps the largest benefit of regulating gambling sites is that customers are protected by law. 

However, they can only be protected if they gamble on legal platforms. If customers choose to make the gamble and move to offshore and unregulated platforms, they lose all forms of legal recompense. 

This might seem like a foolish decision for those on the outside looking in. Nevertheless, put yourself in the shoes of the Brazilian player. If UK sportsbooks banned bonuses, but you could still access reputable, or maybe not so reputable (albeit offshore), gambling companies. Would you choose a UK sportsbook without bonuses or an offshore one with a £30 free bet? Despite the risks of betting at unlicensed sites, not all of us would consider our legal backup when faced with that decision.

A Move to Electronic Transfers

Another addition to  Bill 2,626/2023 is ‘The Payment Ordinance’. This part of the legal framework specifies that deposits and withdrawals can only be made through electronic transfers. So far, so standard. However, the framework differs a little from what we are used to in the UK. While credit cards are still, understandably banned, cash, bank slips, cheques, and cryptocurrency are now also blacklisted too. 

Promoting Ease in the KYC Process

Brazil has seen a steady rise in the number of online casinos and bookmakers accepting cryptocurrency payments. So, it seems an unusual decision to specifically remove the option to pay with crypto. This payment method offers fast, cheap transactions and in some ways levels the playing field in emerging markets, as currency conversion fees are waived.

Perhaps the reasoning behind the ban is to make it easier for companies to identify their customers. As many UK bettors will know, the Know Your Customer (KYC) checks often have to be completed manually when choosing to pay via cryptocurrency, owing to the in-built anonymity of this payment method.

Timely Payments Required of All Operators

The final part of the Payment Ordinance is the ruling that all prizes (winnings from games, or sports betting) must be awarded to the customer within 2 hours of the conclusion of the event. This seems like an absolutely fair rule that puts the consumer first. Yet, there has been some degree of backlash against this ruling. 

The backlash has largely come from payment providers, rather than gambling operators. Many payment providers operate legally in Brazil without the need for a license from the Central Bank. However, under the new ruling all providers would have to obtain one. This means that even payment providers who have been operating legally in Brazil for years are now seen as operating outside of the law - and (most importantly) are missing out on revenue from transaction fees because of this. 

Need for Large Reserves Could Crush Smaller Operators

The ruling requires companies to have considerable reserves to enable these parameters to be met. To ensure timely pay-outs, the Secretariat of Betting and Prizes (SPA) requires all applicants to the regulated betting market to have a financial reserve of R$ 5 million (£770,000) held in a separate bank account.

This guarantees that any pay-outs beyond those expected can still be made on time. The downside to this is, that in order to have this amount of money simply ‘stashed away’, a company has to be fairly well-established. This could create some difficulty for smaller companies or those trying to enter the market.

Thorough Testing and Regulation

Alongside these rulings, the best news for customers is that the SPA has published a list of Certified Testing Facilities that will be able to ascertain the fairness of betting systems and online games. eCOGRA heads up the list, with GLI and BMM Testlabs also being accepted. 

This ensures total fairness and predictability across the board, finally creating a trustworthy betting environment in Brazil. It would be hard for anybody to see a problem with a fairer betting landscape.

International collaboration?

One thing that strikes me though is what, on the surface, seems to be a possible lack of communication between different gaming authorities across the world. Human behaviour doesn’t vary so much from country to country that the different authorities can’t learn from what’s happening in different territories and pre-empt the impact of changes.

Make a change in Brazil, see what impact it has. Make that same change somewhere else, then a similar impact must surely be anticipated?

But of course it remains to be seen what long-term impact this legislation will have in Brazil, and what other countries, including the UK, will take or learn from it. 

Simon Wooldridge
by Simon Wooldridge Last updated:

Simon’s long-term fascination with slots started with teasing 40p worth of change from the skilful spinning of 10p coins into a fruit machine in the last century. This has grown recently to a solid appreciation for the often dazzling artistry, imagination and mechanics of modern online slots.