As of Sunday, the 85 licenses granted to sports betting operators in Brazil will be revoked. Each company had previously paid a BRL30 million ($6 million) grant and made a security deposit of BRL5 million. This change follows the implementation of Provisional Measure 1.394, which has stripped almost 190 brands of their authorization to operate, with no refunds for the amounts paid for the grants.
The government had established strict regulations for sports betting and online gaming, overseen by the Secretariat of Prizes and Bets (SPA). These regulations included the accreditation of international laboratories, the creation of programs to combat problematic gambling, and the implementation of Know Your Customer (KYC) procedures, incorporating biometric identification and other technical and financial requirements.
Companies initially complied, believing in the integrity of these regulations. They were also subject to oversight fees to ensure compliance within the entire ecosystem. However, the recent announcement by President Lula, perceived by many as a political maneuver, prohibited online betting, ostensibly to protect families from incurring debt.
Carlos Lima, the president of the Brazilian Institute for Responsible Gaming (IBJR), expressed frustration over the abrupt changes. "Legal certainty translates into the predictability necessary for long-term investments," he stated, noting that companies had structured complex operations with plans to amortize investments over up to 60 months.
The decision to revoke the licenses comes nearly two years into the regulated market's operation, which had adhered to stringent rules set forth by the government. Lima highlighted that nearly BRL2.6 billion had been paid in grants and around BRL7.5 billion in capital contributions, generating an estimated BRL28 billion multiplier effect in the economy.
Following the enactment of the provisional measure on September 25, operators were immediately prohibited from accepting deposits or bets, leaving them with mere days to refund clients' deposits.
Several prominent trade organizations, including IBJR and the National Association of Games and Lotteries (ANJL), have filed lawsuits with the Supreme Federal Court (STF), along with the Brazilian Association of Radio and Television Broadcasters (Abert) and various football clubs. However, the STF has yet to determine the constitutionality of the provisional measure.
Under this provisional measure, operators have until October 26 to operate under the revoked licenses, which means they will wake up on October 26 without any operational authority and without the possibility of a refund for the licensing fees they paid.
The gambling sector is not only dealing with legal uncertainties, as it awaits a decision from Congress, which has until November 25 to evaluate the provisional measure. However, the Joint Committee for Provisional Measure 1,394 has yet to convene, with no president or rapporteur appointed. Although nearly 100 amendments to the measure have been proposed—many favoring the continuation of sports betting, while excluding online casinos—there's potential for Congress to extend the review period by 60 days, delaying final decisions until March 2027.
Lima raised concerns about the implications of license expirations if Congress rejects the provisional measure. He questioned whether new fees would be required for licenses that would technically have expired.
Despite regulatory challenges, Lima warned that bettors would not cease their activities. He noted an expected surge to illegal gambling sites, which LCA Consultores estimates account for 38% to 44% of the total market. Since the ban, the number of illegal sites in Brazil has already surpassed 30,000.
Lima explained that these illegal operations evade taxation, do not require identity verification or facial recognition, lack self-exclusion tools, and operate outside the oversight of the Council for the Control of Financial Activities (Coaf) and the Federal Police. He emphasized that regulated companies support ongoing improvements to the regulatory framework as a means to safeguard consumers without pushing them toward illegal activities.
