Montgomery & Associados founding and managing partner Neil Montgomery answered Casino Guru’s questions about the regulatory legal framework on gaming and betting in Brazil that is still being hammered on the political anvil. Montgomery is optimistic about the future of sports betting and games of chances in the country and offers insight and historical context in what is still a speculative outlook. Read our interview with the legal expert to find out more.
Can you help us understand the state of current regulation of gambling in Brazil? Why is the new decree an important milestone in the development of the industry?
There are two fronts at the moment. The first pertains to the regulations for Law No. 13,756/2018, which legalized fixed odds sports betting, being rolled out until 12thDecember 2022. The second pertains to the legalization of other gaming verticals, including casinos, bingos and "jogo do bicho", under Bill of Law No. 442/1991, which was approved by the House of Representatives on 24thFebruary 2022 and is currently being processed at the Senate.
There was a general expectation that the Presidential Decree regulating Law No. 13,756/2018 would have been issued by now. However, unfortunately, President Bolsonaro seems to have been convinced by the Evangelical bench at Congress (yet again) to wait until after the Presidential elections, in October, to issue the same. Rumours have it that a Provisional Measure, amending the 2018 law to contemplate penalties for infringement of the law, is also to be released shortly before (or on the day) the Presidential Decree is published.
The industry has been waiting for 3.5 years for the issuance of the Presidential Decree. It is important because it will supplement the 2018 law and establish the licensing procedure for operators to continue to operate in Brazil. A proposed draft decree leaked to the press in May and in it one could see that the Federal Government decided to finally adopt the open licensing/authorization model, which I have been advocating from the outset, and that the license fee had been set at BRL22.2 for a 5-year license, for example. The Presidential Decree itself is still to be supplemented by an ordinance to be issued by the Ministry of the Economy.
Brazil is embracing both online and in-person sports betting. Why is there no pushback against one or the other on a regulatory level do you think?
That is correct. Fixed-odds sports betting (whether online or in-person) has been legalized as a whole. The Presidential Decree is to regulate both formats.
What do you see as the main challenges – if any – for the successful implementation of the new decree?
To the extent that there are between 400 and 500 sports books already accessing the Brazilian market, the first main challenge will be to see how efficiently the Ministry of the Economy will process applications for a license, since it is quite understaffed. In this regard, we will have to wait and see what the final requirements for applying for a license will be. The high license fee will certainly hinder many applications and this can be a concern since this could lead to the creation of a black market of unauthorized operators. The question will then be whether the above-mentioned Provisional Measure, which will also need to be converted into law within 120 days of its publication, will have sufficient teeth to combat the black market and whether the Federal Government will indeed have the necessary enforcement appetite to protect the authorized, licensed market since operators will have paid good money for the license and made additional investments to get their operations running in Brazil.
Do you think there are still shortcomings concerning consumer protection or not properly addressing black market operations?
I reckon that there will be no shortcoming concerning consumer protection since Brazil has had a very rigid and effective consumer protection legal framework since the 1990s and the proposed draft Presidential Decree contains provisions addressing advertising and responsible gaming. My biggest concern will be the black market operations, hence the reason why the Federal Government will have to put a stop to its historical leniency and implement enforcement measures against black market operators.
What do you think will happen in the first few months of legalization and enactment of the decree?
Once the first licenses are issued, I believe that licensed operators will still need a few weeks/months to get their operations up and running. I would expect there also to be potential consolidation of operators in the market and so we should see a number of M&A deals with licensed operators potentially being acquired. Further, we should also see sponsorship changes in the Brazilian football market since only licensed operators will be authorized to continue to sponsor Brazilian sporting teams.
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