Brazil is set to revoke 85 licenses issued to sports betting operators this Sunday, impacting nearly 190 brands that have lost their authorization under Provisional Measure (MP) 1.394. Each licensed company had paid a BRL30 million grant (approximately $6 million) and a BRL5 million security deposit, with no reimbursement anticipated for these fees.
The government’s regulation of sports betting and online gaming involved stringent measures established by the Secretariat of Prizes and Bets (SPA). This included the accreditation of international laboratories, the creation of programs aimed at combating problematic gambling, and the implementation of Know Your Customer (KYC) rules, including biometric identification. Companies fulfilled these regulatory requirements, believing in the government’s commitment to establishing a serious regulatory environment.
However, a month ago, the announcement of MP 1.394 caught operators off guard. This measure is viewed by many as politically motivated and is intended to prohibit online betting as a protection against rising debts faced by families.
Carlos Lima, president of the Brazilian Institute for Responsible Gaming (IBJR), expressed frustration at the government's abrupt change. He noted, “Legal certainty translates into the predictability necessary for long-term investments.” Lima underscored that companies had structured operations expecting five-year amortization periods, which will now be abruptly interrupted, leading to significant losses on their investments.
According to Lima, operators had collectively paid about BRL2.6 billion in grants and an estimated BRL7.5 billion in capital contributions. He estimates this resulted in a multiplier effect of BRL28 billion on the economy.
The provisional measure took effect the night of September 25, barring operators from accepting deposits or bets, compelling them to quickly return client funds. Key trade bodies, including the IBJR and the National Association of Games and Lotteries (ANJL), as well as the Brazilian Association of Radio and Television Broadcasters (Abert) and various football clubs, have initiated lawsuits at the Supreme Federal Court (STF). As of now, the STF has not ruled on the constitutionality of the measure.
As per the new regulations, operators must have their licenses revoked within 30 days, with sites losing their licenses on October 26 and facing no refund for fees paid.
Looking ahead, the sector is in a precarious situation as it awaits an STF ruling and the provisional measure’s progression through the National Congress, which has until November 25 to act on it. A Joint Committee to evaluate MP 1,394 has yet to be formed, creating further uncertainty. Almost 100 amendments have been proposed, primarily aimed at maintaining the betting activities while excluding online casinos.
Without Congress's action, the provisional measure’s deadline could lead to an extension that pushes decision-making into March 2027. Carlos Lima raises concerns about what will occur should Congress reject the measure, particularly regarding the expired licenses.
He warns that the prohibition of legal betting does not eliminate demand; instead, it likely pushes bettors towards illegal platforms, which are currently estimated to capture between 38% and 44% of the total market. Lima has observed a significant rise in the use of clandestine sites, with over 30,000 illegal platforms operating in Brazil that are unregulated and tax-exempt, lack identity verification requirements, and do not offer consumer protections or self-exclusion tools.
“Regulated companies advocate for ongoing enhancements to the regulatory framework, recognizing that continuous improvement of rules is essential for consumer protection without inadvertently driving them towards illegal activities,” Lima stated.
