Law 14,790/2023: Regulation of Bets

1. WHAT IS THE LAW OF BETS?

Law No. 14,790/2023, sanctioned in December 2023 and known as the Bets Law, seeks to regulate sports betting, defined as the “act through which a certain value is placed at risk in the expectation of obtaining a prize”. To this end, the legislation lists a series of important changes for the sector, both for betting companies and for bettors themselves, such as (i) restrictions, such as the prohibition of betting for children under 18 and betting advertisements that encourage excessive gambling, (ii) obligations, such as the provision of information, by betting companies to bettors, about the risks involved in games, (iii) among other provisions described below.

2. NOMENCLATURES

The Law uses technical terms to qualify the parties, agents and other items involved in this type of bet, including:

• Bet: act through which a certain value is placed at risk in the expectation of obtaining a prize; 

• Fixed odds: multiplication factor of the amount bet that defines the amount to be received by the bettor, in the event of a prize, for each unit of national currency bet; 

• Bettor: natural person who places a bet; 

• Electronic channel: electronic website or internet application that makes it possible to place bets exclusively online; 

• Virtual bet: one made directly by the bettor on an electronic channel, before or during the occurrence of the event subject to the bet; 

• Physical bet: one made in person by purchasing a printed ticket, before or during the event subject to the bet;

• Real sports-themed event: event, competition or act that includes sports competitions, tournaments, games or tests, individual or collective, excluding those that exclusively involve the participation of minors under 18 (eighteen) years of age;

• Online game: electronic channel that enables virtual betting in a game in which the result is determined by the outcome of a random future event, based on a random generator of numbers, symbols, figures or objects defined in the system of rules; 

• Virtual online gaming event: online gaming event, competition or act whose result is unknown at the time of the bet; and

• Betting operator agent: legal entity that receives authorization from the Ministry of Finance to operate fixed-odd bets.

3. MODALITIES

Bets can be offered in virtual (through electronic channels) and physical (through printed tickets) modalities. The Ministry of Finance, when granting the authorization, which may be granted for a duration of up to 3 years, will determine whether the operating agent can act in one or both modalities. The Ministry may still reevaluate the permission granted to a particular company if it undergoes major changes in its corporate constitution.

4. AUTHORIZATION

To operate fixed odds bets in Brazil, interested companies must have headquarters and administration in Brazilian territory and obtain authorization from the Ministry of Finance. 

Authorization may be requested at any time by the interested legal entity, observing the administrative procedure established in the regulations of the Ministry of Finance, which will be processed electronically and will have access restricted to the interested party and their attorneys.

Furthermore, companies need to adopt internal policies and procedures to assist bettors, prevent money laundering, responsible gaming and betting integrity. 

Obtaining authorization is; subject to the payment of a grant consideration, the maximum value of which is stipulated at R$ 30,000,000.00, considering the grant for up to one electronic channel per act of authorization. The amount must be paid within a non-extendable period of 30 days, counting from the communication of the completion of the analysis of the application.

5. TAXATION

With regard to taxation, operators will be subject to a rate of 12% on revenue (GGR - Gross Gaming Revenue), in addition to conventional corporate taxes applicable to all companies. Furthermore, prizes that exceed R$2,112.00, after offsetting losses and gains accrued in one year, will be subject to 15% taxation.

6. BETTING SECURITY

The agent operating fixed odds bets must adopt security and integrity mechanisms, in accordance with regulations from the Ministry of Finance. With regard to betting security, another point that deserves to be highlighted is the fact that the legislation seeks to ensure that bettors are supported by the provisions set out in the Consumer Protection Code. 

7. PREMIUM PAYMENT

Payment of prizes must be made solely through transfers, credits or remittances to bank or payment accounts held by the players themselves. These accounts must be maintained in institutions with headquarters and administration in the country, which are authorized by the Central Bank of Brazil.

8. VIOLATIONS

The Law exemplifies a list of infractions, which include, but are not limited to, lottery without prior authorization, carrying out operations that are prohibited or in violation of authorization, obstructing supervision, failing to provide documents or providing incorrect information, disseminating advertising from unauthorized operators, failing to comply with legal and regulatory rules, and contributing to practices that undermine sporting integrity. Violations will be investigated through an administrative sanctioning process, supervised by the Ministry of Finance.

9. LEGAL PROHIBITIONS

The operating agent is prohibited from:

(i) grant an advance, advance, bonus or prior advantage, even as a promotion, publicity or advertisement, for placing a bet; 

(ii) establish a partnership, agreement, contract or any other form of arrangement to enable or facilitate access to credit or commercial development operations by bettors; and 

(iii) allow the installation of an agency, office or representation in its physical establishment that grants credit or carries out commercial development operations for bettors. Exceptions to these prohibitions apply to lottery licensees, as defined by Law No. 12,869, of October 15, 2013.

10. PENALTIES

The following penalties apply to individuals and legal entities that violate the above provisions, whether individually or cumulatively: 

(i) warning; 

(ii) in the case of a legal entity, a fine in the amount of 0.1% to 20% of the revenue collected after deducting the amounts provided for in Law 13,756/2018, relating to the year prior to the initiation of the administrative sanctioning process, noting that the fine will never be less than the benefit obtained, nor greater than R$2 billion; 

(iii) in the case of other individuals or legal entities governed by public/private law and any associations of entities or persons constituted in fact or in law,with or without legal personality, that do not carry out business activity, fine of R$50 thousand to R$2 billion per infraction; 

(iv) partial or total suspension of activities, for a period of up to 180 days; 

(v) revocation of authorization, termination of permission or concession, cancellation of registration, disqualification or similar act of release; 

(vi) prohibition of obtaining ownership of a new authorization, grant, permission, accreditation, registration or similar act of release, for a period of up to 10 years; 

(vii) prohibition of carrying out certain activities or types of operation, for a period of up to 10 years; 

(viii) prohibition of participating in bidding that aims to grant or permit public services, in the direct or indirect federal public administration, for a period of no less than 5 years; and 

(ix) disqualification from acting as a director or administrator and from holding a position in a body provided for in the statute or articles of incorporation of a legal entity that operates any lottery modality, for a period of up to 20 years.

When applying penalties, (i) the severity and duration of the infraction will be considered; (ii) the primacy and good faith of the offender; (iii) the degree of injury or the danger of injury to the national economy, sport, consumers or third parties; (iv) the advantage obtained; (v) the economic capacity of the offender; (vi) the value of the operation; and (vii) recidivism. 

11. CONCLUSION

The sanction of Law No. 14,790/2023 is an important milestone for the sports betting sector in Brazil, bringing a series of changes that will foster a more regulated, competitive and safe sector, also implying greater transparency for bettors, considering that companies will be subject to a series of rules and requirements. Increased competition should also lead to a reduction in fees charged to bettors, which could make the sector more accessible. Furthermore, the increase in revenue is also a positive consequence, as the resources collected can be used to finance social or sporting projects, stimulate the creation of jobs and the search for legal advice.