Relevant Aspects of the Recently Enacted Betting Law (Law 14.790/23)
The President of the Republic sanctioned, with vetoes, Law 14.790/23 (“Bets Law”), published in the Official Gazette of the Union on December 30, 2023, to regulate the sports betting market and promote changes in Laws 5.768/71, 13.756/18 and Provisional Measure 2.158-35/01.
The Bets Law, which deals with virtual and physical betting, real sporting events and online games, establishes taxation criteria, requirements for operating the service, allocation of collected revenues, determines sanctions in case of non-compliance, and defines the competencies of the Ministry of Finance in the regulation, authorization, monitoring and supervision of activities related to the fixed-odds betting market.
Among the main aspects of the Bets Law, the following can be highlighted:
Operating Regime. Fixed-odds betting will be operated in a competitive environment, with prior authorization to be granted by the Ministry of Finance. The authorization for this operation will be a discretionary act of the Ministry of Finance, taking into account the national interest and the protection of the interests of the community;
Term and consideration of the authorization. The authorization will be granted to the so-called "betting operator" on a strictly personal basis (i.e., only for that legal entity), non-negotiable and non-transferable, with a term of 5 years and upon payment of consideration of up to 30 million reais, considering the use of 3 trademarks to be exploited in its electronic channels;
Review of authorization for corporate transactions. The authorization granted to the betting operator may be reviewed in a specific administrative process, under the terms of the regulations to be created by the Ministry of Finance, whenever there is any corporate transaction (merger, spin-off, incorporation and transformation) in the authorized legal entity, as well as the transfer or modification of direct or indirect corporate control;
Requirements for granting. Only legal entities constituted under Brazilian law, with headquarters and administration in the national territory, that meet the requirements contained in the regulations to be defined by the Ministry of Finance will be eligible to receive authorization to operate fixed-odds betting – which should address, for example, the mandatory participation of a Brazilian partner in the betting operator, with a minimum percentage of the share capital;
Corporate impediments. The partner or controlling shareholder of any betting operating agent, whether individual or part of a control agreement, may not hold direct or indirect participation in Sociedade Anônima do Futebol - SAF or professional sports organization, nor act as manager of a Brazilian sports team;
Taxation. In addition to the incidence and collection of other taxes and other taxes (IRPJ/CSLL/PIS/COFINS/ISS), betting operating agents will also be taxed at 12% on the Gross Gaming Revenue (GGR) – gross revenue from the operation. Bettors' net prizes, in turn, will be taxed by the IRPF at a rate of 15% (also applicable to fantasy sport);
Corporate policies. The issuance and maintenance of the authorization will depend on proof, by the interested legal entity, that it has adopted policies, procedures and internal controls, including: (i) prevention of money laundering and terrorist financing; (ii) incentives for responsible gaming; (iii) prevention of pathological gambling disorders; and (iv) integrity of bets and prevention of manipulation of results or fraud; among others;
Adaptation period. The Ministry of Finance will establish conditions and deadlines, no less than 6 months, for legal entities that are already in operation to adapt to the provisions of the Betting Law and the rules established by it in specific regulations;
Advertising rules. The Betting Law provides for a series of advertising and publicity rules1 that must be observed by fixed-odds betting lotteries, such as (i) warnings discouraging gambling and warnings of its harmful effects, (ii) the development of a code of conduct and dissemination of good practices to raise awareness among bettors, and (iii) a prohibition on advertising that conveys unfounded claims about the odds of bettors winning or that suggests that betting can be an alternative solution to financial problems;
Impediments to betting. Participation as a bettor, directly or indirectly, including through an intermediary, is prohibited for, for example: (i) the owner, administrator, director, person with significant influence, manager or employee of the betting operator; (ii) any person who has or may have any influence on the outcome of the sporting event subject to the bets, such as referees, coaches, members of the technical committee, members of competition administration bodies, athletes participating in competitions organized by entities of the National Sports System; and (iii) public agents with duties directly related to the regulation, control and supervision of the activity;
Applicability of the Consumer Protection Code. Bettors are guaranteed all consumer rights provided for in the Consumer Protection Code (Law No. 8,078/1990);
Prohibition of promotional bonuses. Betting operators are prohibited from granting, in any form, advances, prepayments, bonuses or prior advantages, even if merely for promotional, advertising or publicity purposes, for placing bets;
Payment method. Prize payments must be made exclusively through transfers, credits, or remittances to bank accounts held by the respective bettors in financial institutions headquartered and managed in Brazil, and authorized by the Central Bank of Brazil to operate in this country;
Supervision. The betting operator must use auditable systems, to which unrestricted, continuous, and real-time access must be provided to the Ministry of Finance whenever requested;
Penalties. The Betting Law establishes a series of penalties applicable to individuals and legal entities that violate the rules set forth therein, such as fines of up to 2 billion reais, partial or total suspension of the exercise of activities, prohibition from obtaining ownership of a new authorization, prohibition from carrying out certain activities or operating modalities for a maximum period of 10 years, among others; and
No authorization required for Fantasy Sport. The Betting Law exempts the development or provision of services related to fantasy sports – defined as electronic sports where competitions take place in a virtual environment, based on the performance of real people – from requiring authorization from public authorities.
Among the presidential vetoes, those related to tax burdens stand out. The rule establishing tax exemption for annual prizes below R$ 2,112.00 (first income tax bracket) was excluded, meaning that all bettors will now have their net prizes taxed at a rate of 15%, without exemptions.
Furthermore, the concept of "net prizes" and the definition that bettors would have their income tax calculated annually, with payment due by the last business day of the month following the calculation – both previously included in the bill that originated the Betting Law (PL 3.626/23) – were also excluded.
The vetoed sections will be analyzed by the National Congress in a joint session, in which deputies and senators may uphold or overturn the presidential vetoes.
The sports betting market is booming in Brazil, with the companies involved currently being the biggest financiers of national football, through sponsorships of clubs, television broadcasters, and players.
The government expects to collect billions in revenue from regulating the activity, as is the case in other countries. In the United Kingdom, for example, where the culture and tradition of sports betting is centuries old, approximately 26 billion reais are collected annually.
