Recently, on 24 July 2023, Provisional Measure n. 1,182/2023 (“MP 1,182/2023”) was published, with relevant changes and news about the fixed rate bets (“apostas de quota fixa”), where bettors bet on predictions of real sports events and their results, also known as sports betting.
According to the Provisional Measure, the betting exchanges will only be allowed to run their operations in Brazil after acquiring a grant issued by the Ministry of Finance, by an authorization, concession, or license. However, this obligation will only be enforceable after the publishment of a decree by the Ministry of Finance on the matter.
From a taxation perspective, the Income Tax for bettors will be 30% of the prizes received that surpass the exemption cap, currently around R$ 2,100.00 (two thousand one hundred reais). Furthermore, concerning the betting exchanges, MP 1,182/2023 provided a rate of 18% of the Gross Gaming Revenue – GGR, i.e., the total revenue discounted of the prizes paid to the bettors and the Income Tax of said prizes.
Regarding marketing of betting exchanges, MP 1,182/2023 established that the Ministry of Finance will rule on the subject, although recognizing the Brazilian Advertising Self-Regulation Council (“CONAR”) additional jurisdiction. However, the Provisional Measure forbids advertisements of betting exchanges operating without the Ministry of Finance’s grant, under penalty of administrative sanctions.
Moving on about the prohibitions, MP 1,182/2023 vetoed that the betting exchanges’ controllers are also shareholders/stakeholders in Football Corporations (“Socidades Anônimas de Futebol – SAFs”) in Brazil or professional sporting organizations, as well as act as officers in sporting organizations.
MP 1,182/2023 also provided the definition of bettor, which can only be a natural person, as well as established the individuals that are not allowed to place bets, such as minors and people enrolled in credit protection programs, granting the Ministry of Finance powers to extend this ban to other persons. The same prohibition also includes competitors or members of teams taking part in competitions and people connected to betting exchanges or sports entities, as well as their relatives up to the second degree.
Other relevant aspects of MP 1,182/2023 are: (i) obligation to the betting exchanges to draft code of conducts and good practices, as well as security and integrity mechanisms, according to the future regulation by the Ministry of Finance; (ii) possibility that the Ministry of Finance forbids bets other than betting on the final result in particular sports events; and (iii) possibility to notify internet services providers and app stores to block access and downloads to betting exchanges without the Ministry of Finance grant websites and/or apps.
Finally, MP 1,182/2023 provided the infractions and applicable sanctions to natural and legal persons that fail to comply with the rules. The fines will be between 0.1% and 20% of the revenue, limited to 2 billion reais, for legal persons when this revenue can be verified, and between 50 thousand reais and 2 billion reais, for natural persons, other legal persons and associations that do not operate as a business.
Besides pecuniary sanctions, MP 1,182/2023 provided other administrative sanctions, such as warning, suspension of the betting exchanges’ grant up until 180 days, revoke of the grant and prohibition to get a new one or perform certain activities for up to ten years.
Since it is a Provisional Measure, MP 1,182/2023 has immediate effects, even though some provisions will only be enforceable after three months or the Ministry of Finance’s regulation. However, the fully conversion into a Law will depend on the approval by the Brazilian National Congress in a period of one hundred and twenty days. Thus, we expect developments in the near future in the sports betting regulation in Brazil.
Our team is available for further clarifications, as well as to provide assistance with the compliance with sports betting’ regulation.
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