All questions
Overview
Brazil is the largest and most populous country in Latin America, with a total area of 3,265,080 square miles and a population of more than 215 million people (it is the fifth-largest country in the world in terms of size and population).2 Brazil is a federation comprising a union of 26 states, one federal district and 5,570 municipalities.
Because of the depreciation of the real against the US dollar, and following the onset of economic recession in 2015, Brazil's gross domestic product has now been in decline since 2012. Consequently, the country has gone from being the world's sixth-largest economy in 2011 to the 12th-largest at present.3
Almost all gambling activities have been prohibited in Brazil for over 70 years. Since the imposition of a general ban on games of chance in 1941, the only legal gambling activities have been the lotteries under the state monopoly, and horse race betting. According to Brazilian law, poker is a game of skill and, therefore, not illegal.
With the recent economic turmoil, gambling regulation (and taxation) may help the government to raise revenues. Several bills of law concerning casinos, bingos, online gaming and lotteries are currently under discussion in Congress. Integrated resort casinos were included in the Tourism Law Bill, and an Integrated Resort Bill was introduced in 2020.
The opening up of the Brazilian gambling market started with the creation, by Law No. 13,155 of 4 August 2015, of the virtual and land-based instant lottery (sweepstakes) called Lotex. The tender for the Lotex privatisation took place in May 2019, but the only bidding consortium forfeited the award in October 2020. As result, the government will need to reconsider the business model used and will probably have to lower the financial and technical requirements to attract more bidders in any future attempt to privatise Lotex.
Law No. 13,756 of 12 December 2018 (Law No. 13,756/2018) introduced a fixed-odds sports betting lottery model and empowered the Ministry of Economy to regulate this area of law within four years, and to issue licences. Accordingly, implementing regulations were expected to be enacted by December 2022, but proximity to the Brazilian presidential and congressional elections held earlier in October proved critical, and willingness to approve regulations decreased substantially as former president Jair Bolsonaro lost his re-election bid to current President Luís Inácio Lula da Silva (himself a former incumbent).
Nonetheless, officers of the new administration have stated that sports betting regulations are to be enacted shortly, particularly in view of a number of match-fixing cases in the second division of the national football league. As the expected regulations would contribute to improving levels of compliance and oversight, illegal practices such as match-fixing would be more easily detected and punished promptly.
In addition, press reports published at the end of 2022 noted that President Lula's political allies welcomed increased scrutiny of the prospective regulations, as they would allow additional sources of revenue from overseas operators, which would in turn fund new social programmes by the new administration and, thus, help limit unpopular tax hikes. Although it remains unclear whether prior versions of the draft federal regulations will serve as a starting point, new regulations are expected by the second quarter of 2023 – especially because state administrations have already initiated regulatory mechanisms to allow sports betting businesses to operate in their own jurisdictions.
i DefinitionsGambling, in general, is not regulated in Brazil. In fact, since the 1940s, Brazil has been a closed market for gambling, with only state-owned lotteries and horse-race betting. For a brief period in the 1990s, bingo and slot machines were permitted, but they were banned in the mid-2000s.
As a consequence, Brazil's gambling regulation is still in its incipient stages. The term 'game' is a contract type expressly named but not defined by the Civil Code. Its definition is provided by jurisprudence.
Luiz da Cunha Gonçalves4 defines a game contract as 'a commitment, agreed as a pastime or in desire of money, between two or more individuals, in which each player agrees to pay a certain sum of cash or something else to the other parties if he or she loses, based on some future event, implementation of which depends, at least in part, on the activity of the players'.
Clóvis Beviláqua,5 who drafted the original Brazilian Civil Code, defines a game contract as a random contract, in which two or more people promise a certain sum, among the contractors, to the person for whom the result of chance is most favourable. In the same vein, Pablo Stolze Gagliano and Rodolfo Pamplona Filho6 provide a very detailed explanation on game contracts:
In fact, the contract game can be defined as a legal transaction whereby two or more people make a particular promise (usually with pecuniary content) in favour of the person who achieves a favourable result in the performance of an act in which everyone participates.
Note that the game (and thus the success or failure of each party) necessarily depends on the performance of each party (called a player), either by his intelligence, or by his skill, strength or simply luck.
The bet contract, in its turn, is a legal transaction in which two or more people with different opinions on a certain event, promise to perform a particular action (generally with monetary content) to the benefit of the party whose opinion prevails. Hence, in the bet, there is no requirement for the active participation of each party (called a bettor) to influence the outcome of the event but, rather, only the expression of her or his personal opinion.
The difference between a game and a bet is that the result of a game will depend on the action of the parties, while the result of a bet depends on facts unrelated to the parties' will. It is important to highlight that these definitions have been developed through jurisprudence and are not expressly set out by law, although they are widely accepted and applied by the courts.
Games of chance are defined by Article 50 of Decree-Law No. 3,688 of 3 October 1941 (the Criminal Misdemeanour Law) as:
- a game in which winning or losing depends exclusively or principally on chance;
- bets on horse races outside the racecourse or other authorised venues; and
- bets on any other sport competition.
A public place is defined as:
- a private house in which games of chance are held, when those who usually take part are not members of the family that live at the house;
- a hotel or collective residence where the guests or residents are offered games of chance;
- the headquarters or premises of a company or association where games of chance are held; and
- an establishment intended for the operation of games of chance, even if its purpose is disguised.
Games of chance are treated as misdemeanours, which are recognised by law as offences punishable by minor penalties.7 In other words, a misdemeanour is a less serious offence than a criminal violation of Brazilian law. The purpose of using the term 'misdemeanour' is to implement 'moral policing', which, according to Professor Humberto José da Nova, includes 'safeguarding morality' to 'prevent certain illegal and vicious acts, or defend certain moral sentiments regarded as indispensable to harmonious social coexistence, the effects of which are harmful to the interests of the collectivity'.8
In contrast, games of skill are those whose results depend on ability of the player more than on luck. These are lawful.
Lotteries are defined by Article 51 of the Criminal Misdemeanour Law as the operation of payment of prizes depending on the result of a draw of tickets, lists, coupons, vouchers, signs, symbols or similar means. Pool betting, known as bolão, is overseen by Caixa, the competent state operator and regulator, which allows individuals to form a group by choosing the same numbers under one bet registered at any of the 13,000 lottery terminals across the country. To date, online pool betting has not been permitted. Upon being registered in the system, the bet generates a receipt for each participant, who, if successful, can redeem their prize individually, proportionately to their stake in the bet. The player can also acquire shares in pools organised by the lottery houses, in which case each player may pay an additional service fee of up to 35 per cent of the share quota value, at the lottery house's discretion.
Article 51 of the Criminal Misdemeanour Law also prohibits the operation or promotion of unauthorised lottery games in Brazil, including the distribution of foreign lottery tickets in the country. The Brazilian numbers game jogo do bicho (animal game), which is similar to a lottery, is also prohibited.
Horse-race betting is governed by Law No. 7,291 of 19 December 1984 (Law No. 7,291/1984), and Decree No. 96,993 of 17 October 1988 (Decree No. 96,993/1988), which regulates Law No. 7,291/1984.
Contest regulation is subject to federal jurisdiction in Brazil and, therefore, receives equal legal treatment in all 26 states and the Federal District. In Brazil, a contest that is held to promote the sale of products or to promote brands is deemed to be a prize promotion, subject to Law No. 5,768 of 20 December 1971, Decree No. 70,951 of 9 August 1972 and Law No. 13,756/2018.
Finally, fantasy games have yet to be defined legally, but this is being addressed in Bill No. 2796/2021 on the creation of a legal framework for the electronic games industry, which is widely expected to be approved. The Bill was approved by the Chamber of Deputies in 2022 and is currently pending approval by the Senate. According to Article 2, Section 3 of this Bill:
ii Gambling policyFantasy games are considered to be competitions that take place in a virtual environment, based on the performance of athletes at real sporting events, where:
- virtual teams are formed whose performance depends eminently on the knowledge, strategy and skills of the users;
- the rules are pre-established, including the existence of eventual prizes of any kind;
- the value of the prize does not depend on the number of participants or the amounts raised through the collection of registration fees; and
- the results are not solely determined by the score or isolated activity of a single athlete or a single team in real competition.
As a rule, gambling has been prohibited in Brazil since 1946, when all remaining casino permits were cancelled. A number of scholars believe the gambling prohibition in Brazil was a reaction to the industrialisation of the country, because of the need to make free men dedicate their time to work and not to leisure. This, together with the religious belief that 'by the sweat of your brow shall you eat your bread', led to gambling being viewed negatively. However, this belief is no longer socially widespread in Brazil.
There is, however, a general perception that gambling activities in Brazil are a cover for money laundering and that gambling activities are operated by criminal organisations. This derives from the fact that, despite the general prohibition currently in place, bingo halls, slot machines and jogo do bicho can be easily accessed in Brazil.
iii State control and private enterprisePoker and other games of skill, as well as social games, can be operated by private entities. These activities do not require any specific licence.
Horse-race betting is restricted to non-profit entities that own the racecourses, duly authorised by the Ministry of Agriculture, Livestock and Food Supply. These entities may appoint agents to facilitate betting on their behalf and can also hire private suppliers, which are not subject to licensing or any specific regulation.
Until 2020, lotteries could only be state-owned. Caixa was granted control of the federal lottery as result of Decree No. 50,954 of 14 July 1961, which cancelled all private sector lottery licences.
Federal and state lottery operators (i.e., Caixa and the equivalent state entities) could contract suppliers by means of public procurement. There was no specific licence requirement for these suppliers. This traditional framework suffered drastic changes over the past years.
In September 2020, the Supreme Court ruling on the federal monopoly on public services of lottery operations found it to be unconstitutional and an 'unjustified privilege granted to the Union by a centralised piece of legislation enacted during the Brazilian military regime'.9 Therefore, the federal government still retains exclusive constitutional competence to legislate on lottery issues, but both the states and the federal government share the right to operate and offer lottery products.
This ruling has a direct impact on sports betting, as all states will be able to operate sports betting within their territories. In this scenario, the federal government may issue federal licences allowing the licensees to operate both online and retail businesses all over the national territory, regardless of requirements for a state licence.
Each state is allowed to operate sports betting within its borders, directly or with a private operator as a partner. Making a state lottery available outside state territory is a criminal misdemeanour in Brazil; therefore, there will be a lot of discussion as to how to determine the place where an online bet is made.
At the moment, the Federal District and more than 20 of the 27 states have initiated political and legislative processes to create their own lotteries or to modernise and enhance their existing lottery products. In the vast majority of cases, these political movements and legal transformations involve partnering with the private sector to make lotteries more effective and profitable.
In addition, after unsuccessful attempts to privatise Caixa lottery subsidiary Lotex, the federal government is in the process of organising another public tender for the sweepstakes business.
iv Territorial issuesStarting in 1993, when bingo and slot machines were legalised, the state lotteries started to develop new gaming products, issuing authorisations for bingo venues, slot machine parlours and even online gaming based on state laws that allowed these activities in the territory of each state. It was only in 2007 that the Supreme Federal Court ruled definitively, in a decision binding on lower courts (binding decision No. 2), that states and municipalities could not legislate on gambling: 'Any state or district law or legislative act that regulates raffles and consortiums, including bingo and lotteries, is unconstitutional.'
In 2009, however, when faced by a claim that the expansion of the Rio de Janeiro state lottery into keno-style gaming was unconstitutional,10 one judge from the same Supreme Court declared that state lottery regulations enacted before binding decision No. 2 of 6 June 2007 remain valid.
After the 2020 Supreme Court decision, states were allowed to legislate on lotteries, provided that they respected the 'regulatory framework' set by the Union. As Law No. 13,756/2018 already established a general framework under which fixed-odds sports betting can be developed, a number of states (and even municipalities) have already enacted laws or decrees with a view to outlining basic rules for carrying out activities of this kind, and to initiate local tenders for partnerships with private operators. For instance, Paraíba is the first state to deal specifically with sports betting regulation, in State Decree 43,376 of 16 January 2023, with a tender to be issued in the next few months, while the first state to provide services of this kind is the Minas Gerais, through its official website, which is operated by Intralot Brasil.
v Offshore gamblingA legal loophole currently allows offshore operators to offer their gambling products to Brazilian citizens. One of the general rules about contracts in the Brazilian law is that a contract by and between absent parties is deemed to be executed in the place of the proposer. This is set out in Article 9, Section 2 of the Introductory Law on the Rules of Brazilian Law11 and repeated in Article 435 of the Civil Code.
As a consequence, if an offshore operator's website is hosted in another jurisdiction where gambling is authorised, the contract between the Brazilian client and that operator is valid and subject to the law of the operator's jurisdiction. This has some legal consequences in Brazil regarding consumer and data protection laws and unauthorised transborder financial transactions, the latter with potentially criminal aspects. To date, however, there have been no attempts by the government to bring an action against foreign operators.
Legal and regulatory framework
i Legislation and jurisprudenceAccording to the Criminal Misdemeanour Law, games of chance are prohibited in Brazil. Any form of gambling activity that has not been expressly legally authorised may be considered illegal under the scope of the Act and, therefore, anyone carrying out such activity may be prosecuted. Decree Law No. 50,954 of 14 July 1961 establishes Caixa's monopoly on lotteries, and Law No. 7,291/1984 and Decree No. 96,993/1988 regulate horse-race betting.
In the southern state of Rio Grande do Sul, an appeals court decision held that gambling is permissible because the prohibition set out in Article 50 of the Criminal Misdemeanour Law is unconstitutional. The public prosecutor has appealed that decision and the case is now pending judgment by the Supreme Federal Court,12 where it has been granted general binding effect, which means that the decision in this case will be binding for all other similar cases in the country. Judgment in the case has yet to be scheduled and, until the judicial process is resumed, appeals court judges have discretion either to decide cases or to suspend judgment until the Supreme Federal Court renders its final opinion.
In March 2022, the São Paulo state court of appeals, the Court of Justice of São Paulo, reached a similar conclusion in adopting the same rationale as its Rio Grande do Sul sister court and dismissing accusations against an individual suspected of hosting games of chance.
ii The regulatorSECAP oversees lottery activities in Brazil. State lotteries must comply with the gaming standards set out by the Secretariat and may not create new gaming products.
The Ministry of Agriculture, Livestock and Food Supply is the entity responsible for the regulation of horse racing.
Poker is recognised as a sport by the former Ministry of Sports (currently a division of the Ministry of Citizenship) and is not regulated and neither are social games or any other kinds of games of skill.
The free distribution of prizes is regulated by the Ministry of Economy and is subject to prior authorisation by Caixa or by the Secretariat, depending on the operator.
iii Remote and land-based gamblingThere is no distinction between online gambling and bricks-and-mortar gambling for horse-race betting, provided that the general betting plan expressly includes both options. For lotteries, Caixa does not allow lottery points of sale to accept remote bets but does allow Caixa banking clients to place online bets.
iv Land-based gamblingLand-based gambling in Brazil is restricted. Caixa has licensed over 13,000 lottery points of sale that are privately operated with permission (small venues that also operate as bank assistants, accepting payments of general services bills). Jockey clubs have their own agencies and agents (around 200), and these are authorised to accept bets on local and international races. Poker has become very popular in Brazil and there are many active poker clubs in the largest cities.
Law No. 13,756/2018 introduced fixed-odds sports betting as a form of lottery and states that it can be offered by both land-based and online operators. Further, Decree No. 9,327/2018, which regulates Lotex, defines physical bets as those made by the client upon the purchase of a printed ticket, and virtual bets as those made by the client via electronic channels.
The fixed-odds-betting lottery was created by Law No. 13,756/2018 as an exclusive Union public service, commercial exploitation of which will take place throughout the national territory. This type of lottery is legally defined as a system of bets related to real sports events, in which the prize the successful bettor can win is defined at the time the bet is posted.
| Land-based | Online | |
|---|---|---|
| Types of bets allowed | Only fixed odds on sports events | |
| Regulator | Ministry of Economy | |
| Regulations | To be issued by the Ministry of Economy in 2022 (as the term had already been renewed for an additional two years) | |
| Licensing | Authorisation (without tender) or concession (with previous public tender) and yet to be defined by the regulations | |
| Number of licences | To be set by the Ministry of Economy | |
| Mandatory payments (calculated on turnover) |
|
|
| Taxation on players' winnings | 30 per cent withholding tax on each prize over 1,903.98 reais* | |
| Taxation on the operator | Varies between 0.174 per cent and 0.294 per cent of the previous month's payout, according to Annex I of Law No. 13,756/2018. | |
| Other applicable taxes | Ordinary corporate taxes:
| |
| Advertising | This will be guided by best practice in corporate social responsibility, according to regulations that have still to be defined. | |
| Anti-money laundering | The operator will have to send information to the Council for Control of Financial Activities, according to regulations that have still to be defined. | |
| * This amount may change yearly and corresponds to the income tax exemption limit for individuals. |
The Ministry of Economy has a statutory term of up to four years to regulate fixed-odds betting lotteries. However, there is no statutory provision for consequences to arise automatically should this timetable not be met by the government. A critical part of the regulatory regime will be the definition of the competition model: whether the number of licences will be unlimited or limited and, if limited, whether there will be a public tender for licences; or whether the applicants will only have to pay a licence fee and comply with regulatory requirements. The regulator for sports betting, SECAP, has already issued three public consultations on the matter and, despite significant changes to the composition of the authority following the new presidency, regulatory legislation is expected to be released within the coming months.
v Remote gamblingBrazil's federal legislation does not contain any specific provisions on online gambling. Horse-racing entities already offer online betting in Brazil, and Caixa offers online betting but only for Caixa bank account holders. The majority of remote gambling activities in Brazil (mainly sports betting and bingo) involve offshore operators.
vi Ancillary mattersThere are no specific provisions on ancillary gambling matters at the moment.
vii Financial payment mechanismsThere are no specific provisions on payment mechanisms at present.
