New Brazilian Gaming Regulations
A new public consultation on the Brazilian regulation of fixed odds sports betting is now open. These are the preliminary draft regulations summarized:
How will fixed odds sports betting work?
The fixed odds betting modality consists of a betting system with payment of prizes related to real sporting events, in which it is defined, at the moment of making each bet, how much the gambler can win in the event of getting the bet right. The bets can be made in a physical or virtual environment.
Who can bet?
Any person of at least 18 years old and who has an Individual Taxpayer’s Registry number in the case of a Brazilian citizen, or a valid passport number in the case of a foreigner.
Who can be an operator of the bets?
An entity or consortium of companies duly incorporated pursuant to Brazilian laws, with head offices and administration in Brazil, that has obtained the authorization granted by the Ministry of Economy
The process to obtain authorization
The entity must file the request to obtain the authorization together with the following documents: (i) evidence of payment of the authorization fee; (ii) clear criminal, administrative, civil, financial and tax certificates; (iii) declaration that the applicant has never illegally operated in regulated lottery markets and other betting systems with payment of cash prizes; (iv) declaration that there is no impediment to the applicant’s performance, as an operator, in regulated lottery markets and other betting systems with payment of cash prizes; (v) proper documentation, in accordance with the rules issued by the Ministry of Economy or successor body, to prove the absence of conviction in a final decision or, in the case of conviction rendered by a collegiate judicial body, to prove a period of eight years after the completion of the sentence following conviction, for the following crimes: (a) against: life, personal dignity, popular economy, public faith, public administration, public or private patrimony, tax order, financial system, capital markets, environment and public health; (b) those provided for in the bankruptcy law; (c) electoral, for which the law imposes a penalty restricting freedom; (d) abuse of authority, in cases where there is a condemnation leading to loss of public office or disqualification from the exercise of public function; (e) laundering or concealment of assets, rights and financial values; (f) drug trafficking and related drugs, racism, torture, terrorism and heinous crimes; (g) reduction to a condition analogous to slavery; or (h) criminal association.
The amount required for financial reservation
The operator of fixed odds betting shall constitute its own financial reserve of at least six million Reais (R$ 6,000,000.00), as a guarantee of its ability to pay the prizes to gamblers, as a preventive measure in case of insolvency of the legal entity.
Is there any fiscalization by the Ministry of Economy?
Yes. The operator shall provide clarification and display, for examination or expertise, all elements necessary for an audit. Any inspection procedures, once initiated, may last for as long as required.
What are the penalties in case of non-compliance with the rules of the Decree?
The offender will be subject to the following administrative sanctions, determined in accordance with the seriousness of the offense committed, by means of the due process of law, and the response and full defense are guarantee: (i) warning; (ii) simple fine; (iii) daily fine; (iv) seizure of instruments, documents and other objects and components intended for the operation of machinery and installations; (v) partial or total suspension of activities; (vi) interdiction of the establishment and the website; (vii) expiration of the authorization; (viii) prohibition to acquire the ownership of a new authorization for a maximum period of ten (10) years; (ix) temporary or permanent disqualification of systems, equipment or instruments that support bets; (x) declaration of unsuitability; and (xi) compulsory dissolution. The fines may be applied cumulatively with other penalties and shall be set at amounts of up to one hundred percent (100%) of the gross revenues, for each infringement.
Is there any other requirement for the exploitation of fixed odds sports betting in Brazil?
Yes. The operation of the fixed odds sports betting shall include the adoption and implementation of a policy of prevention of money laundering and terrorism financing compatible with the size and volume of the Lottery’s operations, which must comprise, at a minimum, procedures and controls intended for the: (i) due diligence to qualify clients and others involved in the operations carried out, when, pursuant to the regulations in force, the identification of the winner is mandatory; (ii) identification of the final beneficiary of the operations carried out; (iii) identification of operations or proposals for operations that are: a) suspicions; or b) of mandatory communication; (iv) periodic verification of the performance of permitted persons or agents; (v) mitigation of the risks that new products, services or technologies may be used for money laundering or terrorism financing; and (vi) periodic analysis of the effectiveness of the policy adopted.
By means of this new public consultation, the Ministry of Economy, i.e. the Secretariat of Evaluation, Planning, Energy and Lottery, intends to obtain suggestions in order to adapt the Decree to be in accordance with best world practices.
Participation in the public consultation can be made until 11:59pm on September 27, 2019. Through our local partners in Brazil, ARQ’s gaming unit has the expertise to assist clients in this respect. For further info kindly contact Kris Baron on [email protected].