Starting this Sunday, the Brazilian government will revoke 85 licenses granted to sports betting operators. These companies had each paid a grant of BRL30 million (approximately $6 million) along with a BRL5 million security deposit. Nearly 190 brands that operated under the licensed market will lose their authorizations due to the implementation of Provisional Measure 1.394, which holds no promise of returning the amounts paid for the grants.
In establishing regulations for sports betting and online gaming, the government, through the Secretariat of Prizes and Bets (SPA), instituted stringent guidelines. This included the accreditation of international laboratories, the creation of programs aimed at addressing problematic gambling, and the introduction of KYC rules, which entail biometric identification. These measures were developed to ensure companies met specific technical and financial standards.
Operators followed the rules expecting the integrity of the regulation process. The framework included an oversight fee designed to enforce compliance across the entire ecosystem.
However, many in the industry were caught off guard when President Lula announced Provisional Measure 1.394 about a month ago. Seen as a politically motivated decision, the measure aims to restrict online betting to “protect families from indebtedness.”
The regulated market, which has been in place for one year and nine months, now faces disruption due to the very government that initially regulated it. Carlos Lima, president of the Brazilian Institute for Responsible Gaming (IBJR), commented, "Legal certainty translates into the predictability necessary for long-term investments." He emphasized that companies had constructed elaborate operations designed for amortization over 60 months.
"On 25 October, contractual agreements designed to last five years will be abruptly interrupted, without any maturation period or return on investment," Lima stated. He noted that operators had collectively paid around BRL2.6 billion in grants and about BRL7.5 billion in capital contributions, generating an estimated BRL28 billion economic impact.
The provisional measure took immediate effect on the night of 25 September, instantly halting operators from accepting deposits and wagers. They were given only a few days to return client deposits.
Prominent trade organizations, such as the IBJR and the National Association of Games and Lotteries (ANJL), have filed lawsuits with the Supreme Federal Court (STF), joined by the Brazilian Association of Radio and Television Broadcasters (Abert) and football clubs. To date, the STF has not ruled on the constitutionality of the measure.
Under the provisional measure, a 30-day countdown for license revocation has been established. As of 26 October, these betting sites will operate without valid licenses and will not have refunds for their license fees.
With the legal battle ongoing, the industry is now looking toward the National Congress for the processing of the provisional measure. Legislators have until 25 November to review the measure, but a Joint Committee for Provisional Measure 1,394 has yet to be formed, lacking both a president and a rapporteur despite the appointment of members.
Nearly 100 amendments have been proposed, mainly seeking to preserve activities but focusing solely on sports betting while excluding online casinos. Congress has the option to extend the voting period for the provisional measure by 60 days, which could delay the review until March 2027. Starting 9 November, it will also block the National Congress's agenda.
Lima raised concerns over the fate of the licenses that will expire on 25 October, questioning, "If Congress rejects the provisional measure, what happens to the expired authorizations? Will it be necessary to pay a new fee? The situation remains legally uncertain."
Despite the uncertainty, he asserts that betting will persist, with a noticeable shift toward illegal sites resulting in a growing black market, currently estimated at 38% to 44% of the total market, according to LCA Consultores. Lima noted that the shift to clandestine sites had gained momentum following the ban, with over 30,000 illegal sites now operating in Brazil.
These unregulated sites evade tax obligations, lack identity verification and facial recognition, and do not provide tools for self-exclusion, all while operating outside the oversight of bodies like the Council for the Control of Financial Activities (Coaf) and the Federal Police.
Lima reiterated, "Regulated companies accept and advocate for the ongoing enhancement of the regulatory framework, understanding that continually improving regulations is essential for consumer protection without pushing them toward illegality."
