The Corporate, Tax and Regulatory Aspects of Brazil’s Sports Betting Law

On December 30, 2023, President Luiz Inácio Lula da Silva sanctioned, with vetoes, Law No. 14,790, which regulates fixed-odds betting on sports in real or virtual events (e-sports).

Law 14.790/2023 consolidated aspects addressed in Provisional Measure No. 1.182/2023 regarding the operation of gambling houses, the taxation of net prizes, aspects of corporate governance, and advertising methods, among others, as well as certain aspects that will still be subject to new regulations, such as the corporate, tax and regulatory aspects listed below.

It is also important to note that, according to Law 14.790/2023, e-sports betting must be operated in a competitive environment by operators who must meet the minimum requirements for obtaining prior authorization ("Grant") from the Ministry of Finance. This demonstrates the government's intention of regulating the market, establishing criteria and authorization for operations in Brazil.

Although the specific conditions for obtaining authorization have yet to be established in the Ministry of Finance's own regulations, the law provides minimum requirements for companies applying to obtain the Grant.

Minimum statutory and corporate governance aspects:

In order to obtain the Grant, the legal entity (which must be incorporated under Brazilian law, with its head office and management within the national territory) must satisfy the requirements set out in the regulations that will be issued by the Ministry of Finance, which will include, at least: (i) a minimum amount and form of share capital, (ii) proven knowledge and experience in the area by at least one member of the controlling group; (iii) compliance with requirements for holding and exercising management positions; (iv) appointment of an officer who is directly responsible for the relationship with the Ministry of Finance; (v) offering a customer service and ombudsman service to the bettor, and respective appointment of an officer responsible for this area; and (vi) meeting technical and cybersecurity requirements.

Furthermore, each betting operator must have at least one Brazilian partner holding at least 20% of the legal entity's share capital.

The law prohibits the participation of a partner or controlling shareholder who holds a direct or indirect stake in a soccer corporation or professional sports organization, or who acts as a manager of a Brazilian sports team.

It also requires that the operating agent be part of a national or international sports integrity monitoring body, such as the Brazilian Association for the Defense of Sports Integrity (Associação Brasileira de Defesa da Integridade do Esporte, “ABRADIE”) or the Sport Integrity Global Alliance (“SIGA”), respectively.

Manipulation of results and other frauds:

In order to prevent the manipulation of results, Law 14.790/2023 establishes that bettors may not be: (i) the owner, administrator, director, manager, employee, or other person with significant influence of the operating agent; (ii) a public agent with duties directly related to regulation; (iii) public agents with duties directly related to the regulation, control, and supervision of the activity within the scope of the federal entity under their jurisdiction; (iv) persons who have, or may have, access to the computerized systems of fixed-odds lotteries; and (v) persons who have, or may have, any influence on the outcome of a real sporting event that is the subject of a fixed-odds gambling lottery.

Accordingly, it is up to the operating agent to notify the Ministry of Finance of any signs of fraud. The well-founded suspicion of match-fixing in sports will result in the suspension of bets and the withholding of prize payments for the suspected event until the administrative sanctioning process has been completed, as well as other restrictive measures designed to prevent or mitigate the consequences of practices that violate the integrity in sports, as described in Article 45 of the aforementioned law: (i) the immediate suspension of bets and the withholding of prize payments in relation to the suspicious event; (ii) the suspension or prohibition of one or more operating agents from betting on concurrent or specific events occurring during the test, match or suspected dispute, other than the specific prediction of the final result; and (iii) other measures designed to avoid, or mitigate the consequences of, practices that violate the integrity of the sport.

Pathological gambling disorder and the involvement of minors under the age of 18:

In order to discourage pathological gambling, the law prohibits an operating agent from establishing any kind of partnership with a business which facilitates a bettor’s access to credit or other commercial development operations. As mentioned, it is also necessary for the operator to be a member of a sports integrity monitoring body.

The legal provision also strictly prohibits betting on competitions played by minors, either directly or through an intermediary.

In addition, the use of minors in advertising to the betting market is also prohibited, as is the broadcasting of these advertisements in schools, universities, or any other means directed toward minors.

Taxation:

With regards to the tax imposed on operators, a fixed percentage of 12% will be paid on Gross Gaming Revenue (GGR)—which refers to the total amount received in bets, minus the amount paid out as prizes—which is intended exclusively for social purposes. Individual Income Tax (IRPF) will also be levied at the rate of 15% on net winnings, which is also applicable to fantasy sports.

The law establishes a limitation period of 90 days from the announcement of a result for the bettor to claim their prize, if they have not received a prize or refund from the operating agent. Any winnings not claimed within this period are to be used for social purposes.

For now, the Ministry of Finance awaits the publication of complementary legislation, which should define other legal, financial, technological and cybersecurity requirements necessary to obtain authorization, as well as the statutory and corporate governance parameters and other government oversight.

Team TCMB is happy to answer any questions you may have and provide further information on the process of obtaining a grant, the parameters of Law 14.790/2023, and the regulation of sports contributions. Please don't hesitate to contact us.

We will continue to monitor legislative developments in the betting market and keep you informed through our Legal Updates.

*Gabrielle Medeiros da Silva collaborated with the authors on this content.