Provisional Measure modifies legislation on sports fixed-odds betting (“BETs”)

Provisional Measure modifies legislation on sports fixed-odds betting (“BETs”)

Provisional Measure 1182/2023, authored by the Brazilian President, entered into force upon its publication on July 25, 2023, modifying provisions of Law 13756/2018, which rules on the allocation of lottery incomes and the commercial promotion of fixed-odds betting, the operators of which are known as BETs. The main effects of MP 1182/2023 are analyzed below.

Main effects

  • Taxing at 18% and income allocation

One of the main effects of this MP is that operators of fixed-odds betting in real or virtual media will be taxed at 18% on the revenue obtained from the games, after discounting the payment of prizes to players and the income tax due on the prize. As to the predicted collection amount, according to the Brazilian Senate Agency (Agência Senado), “it is expected that the government collect up to BRL 2 billion still in 2024, an amount that may reach up to BRL 12 billion in the upcoming years”.

A maximum of 82% will be used to cover the costs and maintenance of the agent operating the fixed-odds betting lottery. After deducting the payment of prizes and income tax on the prize, the proceeds of the collection will be subject to social security contributions at the rate of 10%, to be calculated and collected on a monthly basis.

In addition, there will be the following allocations: 3% to the Ministry of Sports (until July 24, 2028 and, afterwards, to the National Treasury, for free use by the Union); 2.55% for the National Public Security Fund (FNSP); 1.63% for the entities of the National Sports System and for Brazilian athletes or clubs, in return for the use of their names and symbols linked to the dissemination and execution of fixed-odds bets; 0.82% for basic education. These transfers will be calculated and collected by the operating agents, monthly, according to a regulation to be issued by the Ministry of Finance.

  • Authorizations and operational aspects

The Ministry of Finance is the body responsible for granting, permitting or authorizing the lottery of fixed-odds betting, in return for payment, and it is up to the Ministry itself to fix the value of the license. The exploitation of the activity must take place in a competitive environment, without limit to the number of licenses. Commercialization is permitted in any commercial distribution channel, by physical or virtual means.

The authorization to operate fixed-odds betting lotteries may be requested by legal entities, whether national or foreign, duly established in Brazil, and it must meet the requirements of the Ministry of Finance established in its regulations.

Other topics attributed to future regulation by the Ministry of Finance are:

  1. the authorization for lottery agents of fixed-odds betting to use intellectual property rights of athletes, such as image, name, sports nickname and others;
  2. the authorization for lottery agents to use denominations, marks, emblems, anthems, symbols and other attributes of sports organizations;
  3. communication, advertising and marketing actions of fixed-odds betting lotteries.

On this last topic, the MP encourages self-regulation and allows the National Council for Advertising Self-Regulation (CONAR) to establish additional restrictions and guidelines and to issue specific recommendations for such actions. In addition, there should be, on the part of lottery agents, promotion of informative actions to raise awareness of players and prevent pathological gambling disorder (gambling addiction).

  • End of the Union’s exclusivity

As from MP 1.182/2023, the lottery modality of fixed-odds betting, in the form of public service, is no longer exclusive to the Union.

  • Prohibitions and penalties

The betting operating companies, their subsidiaries and controlling companies may not acquire, license or finance the acquisition of rights to sporting events held in Brazil for any form of display of their sounds and images, by any means or process.

In addition, a controlling partner or shareholder of a fixed-odds bets operating company is prohibited from holding shares in a football corporation or in a professional sports organization, as well as from being a director of a Brazilian sports team.

There are also prohibitions around the marketing and commercial advertising on websites and by individuals and legal entities that offer or exploit lottery of fixed-odds betting without license from the Ministry of Finance. However, this prohibition will only enter into force within a period to be indicated by the Ministry of Finance.

MP 1.182/2023 holds a list of administrative misconducts and penalties for non-compliance. Among the misconducts, the following stand out: exploiting lottery of fixed-odds betting without prior concession from the Ministry of Finance; carrying out prohibited or unauthorized activities; hindering enforcement; providing incorrect data or documents or submitting them beyond the set deadline; performing any type of fraud or interference that affect the outcome of the sporting event; among others.

The following penalties are set forth: warning; fine between 0.1% and 20% of the companys collection amount (after deducting payments of prizes, social security contributions and tax on income), up to BRL 2 billion per infraction; suspension of activities; cancellation of license; prohibition of obtaining new license for up to 10 years; prohibition from participating in bids for concession or permission of public services for at least 5 years; and others.

Players will lose the right to receive their winnings if they do not claim them within 90 days of the first disclosure of the result of the event subject to the bet. The unclaimed amounts will be reverted to Fies (a student funding program) until July 24, 2028 and, afterwards, to the National Treasury, for free use by the Union.

Finally, MP 1182/2023 introduced a list of agents prohibited from placing bets, directly or indirectly, for instance: owners or persons with influence over the bets’ operating agent; public official linked to the supervision of the activity; people under 18 years old; people with access to computerized fixed-odds lottery systems; people with influence on the results of real sporting events object of the lottery; people registered in national credit protection registers.

Relevant definitions (Law 13756/2018 and MP 1182/2023)

The lottery modality called fixed-odds betting consists of a "system of bets related to real sports-themed events, in which it is defined, at the time of placing the bet, how much the player can win in case of correct prognosis.". 

The following are considered real sports-themed events: "event, competition or act that includes sports competitions, tournaments, games or events with human interaction, individual or collective, excluding those that exclusively involve the participation of minors under eighteen years of age, the result of which is unknown at the time of the bet" and that are organized or promoted by the national sports administration organization or its affiliates, according to the General Sports Law (Law 14.597/2023); or by sports administration organizations based outside Brazil.

Operating agent is the legal entity that holds a license from the Ministry of Finance to exploit lottery of fixed-odds bets in actual and virtual environment. Player is the natural person who bets on a virtual channel or acquires a ticket in printed form on a physical channel.

While the physical bet is made in person through the purchase of a ticket in printed form, the virtual bet is made directly by the player in an electronic channel. In both cases, the bet is placed before or during the occurrence of the real event that is object of the bet.

Next steps

Some items introduced by MP 1182/2023 are pending regulation by the Ministry of Finance, as previously highlighted. In addition, some sections will only come into force from November 1, 2023 or after the Ministry of Finance regulations (such as, for example, regulation on the granting of licenses).

Currently, the MP is awaiting designation of a Joint Committee and, after the necessary procedures, it will follow to the Plenary of the House of Representatives. If approved in this House, it will go to the Senate for consideration. Senators and Representatives will have altogether a maximum of 120 days (counted from publication) to assess the Provisional Measure, under penalty of losing its effectiveness.

The Technology, Media and Telecommunications team at Azevedo Sette Advogados follows up the development of this topic and remains at your disposal for questions and contributions.