Bets Law: law regulating the sector in Brazil comes into force
On December 30, 2023, the “Bets Law” (Law Nº 14.790/2023) entered into force, which regulates the lottery method known as fixed-odds betting. The Bets Law changes several Brazilian laws, including Law Nº 5,768/1971, Provisional Measure Nº 2,158-35/2001 and specially on Law Nº 13,756/2018, which created the modality commonly known as bets. As we reported in August this year (see here), regulation gained strength with the publication of Provisional Measure Nº 1,182/2023, which brought substantial changes to Law Nº 13,756/2018. The National Congress will still consider the presidential vetoes to 06 articles of the Bets Law.
Below we highlight the main points of the sanctioned proposal, covering regulatory, tax and compliance aspects:
Concept
According to the Bets Law, fixed-odds lotteries cover real sporting events, such as soccer matches, and virtual online gaming events. Players have the chance to win by guessing specific game conditions or the result of the match. The bets can be placed physically, by printed tickets, or online, by virtual channels.
Betting shops can be legal entities, incorporated under Brazilian law, with headquarters and administration in national territory. The Law also requires that the legal entity operating the activity has a Brazilian as a partner holding at least 20% of its share capital.
In addition, betting shops must obtain a concession from the Ministry of the Treasury, valid for 5 years, and must pay a fixed amount of consideration, to be established by regulation and limited to 30 million BRL. The Law also allows up to 03 commercial brands to be linked to the same concession.
Persons Prohibited from Betting
Participation in betting is forbidden to persons under the age of 18, public agents that regulate the betting activity, employees of the betting shops, persons who may in any way influence the betting results and persons who may access the betting systems.
Taxation and allocation of revenue
In the original text proposed by the Federal Government, 18% of Gross Gaming Revenue, which corresponds to the proceeds from betting shops minus the prizes paid out, was to be allocated to the areas of social security, health, education, sports and other sectors. However, in the text approved and sanctioned, the percentage was reduced to 12%.
In addition, the sanctioned text reduces income tax on prizes paid out to gamblers from 30% to 15% compared to what had been proposed by the Federal Government. The President also vetoed a section that provided for exemption from income tax on prizes of up to 2,112.00 BRL.
Communication, Advertising and Marketing Actions
The Ministry of the Treasury will be in charge of regulating communication, advertising and marketing related to sports betting, prioritizing self-regulation. The Bets Law also prohibits the presentation of betting as a financial solution, job or investment.
In addition, on December 11th, CONAR (National Council for Self-Regulated Advertising) issued the Annex X to the Brazilian Advertising Self-Regulation Code, which will come into force on January 29th, regulating advertising involving sports betting.
Among the guidelines established are the identification of the advertising nature of the content disseminated and the advertiser responsible, as well as the prohibition of appeals to pressure the practice of betting and the encouragement of irresponsible betting, excessive repetition and exaggeration.
The Annex X also requires that advertisements contain phrases about age restrictions for the activity and a warning clause about the risks involved in betting. Betting advertising must also contain a truthful presentation of the service offered, with the prohibition of promising certain, easy and/or high winnings and results.
The Annex X can be found here.
Preventing money laundering and fraud in sport
The Bets Law introduces rules of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) and it seeks to promote the integrity of the sports betting industry. Among the measures, the Law established the adoption of internal controls and specific corporate integrity policies, as well as the identification of bettors and the submission of operating agents to Coaf.
The Law also establishes that will be exclusive to institutions authorized to operate by the Central Bank of Brazil the offer of transactional accounts which allow bettors to carry out payment transactions for fixed-odds bets and receive of prizes.
Inspection and administrative infractions
The Betting shops must guarantee unrestricted access to the Ministry of Finance and report any evidence of manipulation of results within five working days.
The administrative violations punishable include: (i) operating a fixed-odds lottery without a prior license; (ii) carrying out operations or activities that are prohibited, unauthorized or in disagreement with the license granted; (iii) obstructing the supervision of the competent authorities; (iv) failing to provide the competent authorities with data, documents or information required by the regulations.
The configuration of one of the hypotheses of administrative violation, after the administrative process, will give rise to the application of an administrative sanction, including (i) a warning, (ii) a fine (calculated on the proceeds of the revenue, never less than the advantage gained, when possible to estimate, nor superior to R$ 2 billion); (iii) partial or total suspension of the exercise of activities or even prohibition of carrying out certain activities; (iv) revocation of authorization, cancellation of registration, disqualification or similar act of release.The administrative sanctioning process will follow the procedure set out in regulations issued by the Ministry of the Treasury and may be suspended or not initiated if the investigated party signs a Commitment Agreement with the Ministry of the Treasury. In the Commitment Agreement, the investigated party must commit to: (i) stopping the practice under investigation or its harmful effects; (ii) fixing the irregularities pointed out and compensating the losses; and (iii) fulfilling the other conditions agreed in the specific case, with the obligatory payment of a pecuniary contribution.