Starting this Sunday, all 85 licenses granted to sports betting operators in Brazil will be revoked. These companies had initially paid a fee of BRL30 million (approximately $6 million) and made a security deposit of BRL5 million. Almost 190 brands that were operating legally will lose their authorized status due to Provisional Measure 1.394, without any refund for the fees they paid.
The government had established strict regulations for sports betting and online gaming through the Secretariat of Prizes and Bets (SPA). This included the accreditation of international laboratories, the creation of responsible gambling programs, and the implementation of KYC measures, including biometric identification. Operators adhered to these regulations, believing in the government's commitment to these new rules, which even included an oversight fee to ensure compliance within the entire ecosystem.
However, a month ago, President Lula announced Provisional Measure 1.394, which many view as an attempt to influence public sentiment ahead of the elections. The measure prohibits online betting in a bid to protect families from potential debt.
Carlos Lima, president of the Brazilian Institute for Responsible Gaming (IBJR), expressed frustration with the decision, noting that the regulated market, which had adhered to strict guidelines for a year and nine months, is dismantled by the government that initially set it up. "Legal certainty translates into the predictability necessary for long-term investments," Lima stated.
He pointed out that operators had established complex structures intended for a five-year amortization period. "On 25 October, contractual agreements designed to last five years will be abruptly interrupted, without any maturation period or return on investment," Lima added, revealing that nearly BRL2.6 billion was paid in grants along with roughly BRL7.5 billion in capital contributions from operators, leading to an economic multiplier effect of BRL28 billion.
The provisional measure took effect on the night of September 25, immediately barring operators from accepting any new deposits or bets, leaving them only a short time to refund customer deposits. The main industry bodies, including the IBJR and the National Association of Games and Lotteries (ANJL), have challenged the measure in the Supreme Federal Court (STF), joined by the Brazilian Association of Radio and Television Broadcasters (Abert) and several football clubs. The Court has yet to rule on the constitutionality of the provisional measure, which mandated a 30-day deadline for license revocation, meaning that operators will find themselves without licenses starting October 26.
The future of the industry remains uncertain as the provisional measure awaits processing in the National Congress, which has until November 25 to review it. Although members have been appointed to a Joint Committee dedicated to this measure, a president and rapporteur have yet to be chosen. Nearly 100 amendments have been submitted, most focusing on maintaining operations but excluding online casinos, limiting it to sports betting.
Congress has the option to extend the voting period by another 60 days, which could push the review deadline to March 2027. This would further complicate the situation. Carlos Lima has raised critical questions regarding the fate of licenses expiring on October 25, asking, "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 legal challenges, Lima emphasized that bettors would continue to find ways to gamble, which is likely to bolster the black market. Current estimates suggest that illegal operations constitute between 38% and 44% of the total gambling market in Brazil, according to LCA Consultores. With more than 30,000 illegal sites already functioning in the country, this shift towards unregulated gambling is gaining momentum since the prohibition was announced.
These illicit operations do not adhere to tax regulations, identity verification, or facial recognition standards. They lack self-exclusion tools and operate without the oversight of the Council for the Control of Financial Activities (Coaf) or the Federal Police.
Lima insisted that regulated operators are committed to supporting a stronger regulatory framework, as they recognize that constant improvements in regulations are essential for consumer protection without driving users into illegal channels.
