Home NewsRegulations & Licenses Why is it so difficult to get online gambling licences in Brazil?

Why is it so difficult to get online gambling licences in Brazil?

20 views 8 minutes read

Brazil will announce the final regulations for online gambling in July. However, only one application has so far been made to the regulator. Since the 21st May window was opened, the market is buzzing. When will the remainder of applications pour in?

According to H2 Gambling Capital, the opening of the license window was a significant milestone for the much-anticipated legalisation of gambling in Brazil. The market is estimated to reach $9bn by 2028 (PS7bn/EUR8.3bn).

Fellipe Fraga, the chief business officer of local operator EstrelaBet predicts that operators will wait until July to apply for licences.

He says that “there are important issues to discuss in order to obtain the license.”

The remaining ordinances are expected to contribute towards the development of strategies for companies in their regulatory processes.

Fraga said EstrelaBet wants to know more from the Ministry of Finance’s Secretariat for Prizes and Bets (SPA), on how it can create a responsible and safe betting market, before submitting its application.

Fraga says that it is important to await confirmations and clarifications by the regulator. This will help Brazilians to enjoy the games responsibly and with greater understanding.

Companies that submit their applications within 90 days of the initial period, which closes on the 20th August, are placed in the first line for evaluation and will have the application processed before 1st January 2025. Then, operators who have not yet obtained a license will face punitive measures.

Kaizen and the first mover advantage

As of the date this article was written, only Greek operator Kaizen Gaming had submitted an application.

Hugo Baungartner is the CCO at Aposta Gahna. He notes that Kaizen has a leading position on the grey market in Brazil. He says, “They were trying to be first.” I know, because they have been preparing since the beginning.

Kaizen, through its Betano product line, signed up as the official sponsor of this year’s Copa America Football Tournament to increase its presence in LatAm. In May, it also signed a deal to sponsor the top football division in Argentina.

Insecurity and non-compliance are delaying the process

Baungartner believes that between 20-25 operators will submit applications before August’s deadline. The 90 days provided by the SPA are enough for the companies to prepare their business affairs.

He says that “the homework is manageable, and the operators have still time to demonstrate certification.”

The government should publish all ordinances before the deadline for application.

The remaining 43 days for the priority window should be enough time for operators, he says.

But, on the World Series of Politics podcast, Baungartner said some of the smaller operators would not be able to afford the BRL30m (PS4.3m/EUR5.1m/$5.9m) licensing fee, noting that the grey market would always be present in the country.

Some of them do not have $5,9m and are happy with their current situation. He says that he believes the grey market is here to stay.

Many commentators in the industry have voiced concern about the lengthy application process, which could cause operators to be delayed beyond the 90 day window.

Fabio Ferreira, partner and lawyer at Mattos Filho believes that 90 days are not enough, considering the “number of bureaucratic barriers” faced by operators.

Also, there is some confusion about the exact requirements for applying for an online betting license.

I believe that the current understanding of this issue should be altered so that any company that has not requested an authorisation in writing by 31 December 2020 should be considered illegal.

Hurdles that you must overcome

The “bureaucratic barriers” that applicants face include having a Brazilian-owned local subsidiary, holding at least 20% of its share capital in the local company (for foreign firms), as well as a reserve financial of BRL5m (915 719 dollars) above the license fee.

In addition to a series of security and technical requirements, the ordinance on licensing outlines a number of other important issues.

Baungartner cites the imminent publication of an online gaming ordinance as the key tipping-point for license applications. It will clarify which games are legal to offer online.

The regulator “wants things done right” and he believes that the regulatory body’s extensive requirements are justified.

Baungartner says, “They are making sure that labs approved for the Brazilian markets know how to certify games in the ordinance.”

Fraga shows sympathy to the regulator for the difficulties of introducing legal gambling frameworks, but also believes that further delays may be detrimental to an industry with a responsibility.

Fraga says that it is “possible to understand” the regulator’s role in this. Fraga continues: “However any further delay [until regulations are in place] will harm the country, as it is more likely to be unable to obtain the tax revenues and to have the rules for the market defined to begin fighting against practices that go against what’s expected from good behavior.”

You must meet the requirements

Operators must meet a set of conditions outlined by the ordinances before they can obtain a license. They include:

  • BRL30m is the licence fee. The licence is valid for five years, and allows three skins.
  • The headquarters must be located in Brazil
  • Brazilians must own at least 20% of the share capital of a foreign company’s local subsidiary
  • Documentation proving legal rights to operate in Brazil
  • The Central Bank of Brazil must certify the compliance of payments regulations with a declaration of conformity.
  • Tax certificate issued by the Attorney General of the National Treasury and the Special Secretariat of Federal Revenue
  • The criminal records of all core staff and beneficiaries should be clean
  • Signed by the finance director or an equivalent, this document shows projected cash flows for two years.

Launch in 2025 is the goal.

Legal online gambling in Brazil will be available on January 1, 2025. Punitive measures will then come into effect for operators who are not licensed.

Udo Seckmann, the head of gaming & crypto for Bichara e Motta Advogados said he expected up to 60 operators in the initial wave to apply.

He says that some of the people are afraid of missing out in this first wave.

The operators aren’t sure but say, “Let’s see how it goes. If we don’t like the results and we become unprofitable, we can always leave.”

Seckelmann predicts that the vast majority of first-wave applicants will be foreign companies, and then local operators. Seckelmann says that up to 70% percent of the betting license applicants are likely to be foreign companies.

Confidence still remains high in Brazil

Although Kujawski and Fraga pointed out that the current regulation implementation was a major reason why there were no applications for licences, Brazil remains confident in the fact that a surge in requests is imminent.

The Ministry of Finance revealed in January that 134 operators, both local and foreign, had expressed their interest by signing the pre-market ordinance.

Baungartner said Aposta Gaha would apply during the first week in August. EstrelaBet will, according to Fraga, apply when “the time is right” for their company.

While the rush for licenses isn’t quite here yet, the industry seems to be expecting a flood of applications once the regulations are fully in place, following a lengthy and sometimes drawn out journey towards legalisation.

You may also like

About Us

On iGamingWorld, we provide in-depth analysis, the latest news and opinions from famous people of the gaming industry.

Featured Posts