Navigating Regulatory Waters: Brazil’s Strategy to Curb Offshore Betting
By Newton Fleury Filho
Brazil is on the verge of a significant transformation in its gaming industry, with new regulations poised to give regulated operators a substantial advantage over offshore books. These measures, aimed at curbing the influence of unregulated operators, are set to reshape the landscape of sports betting and iGaming in the country. As Brazil moves towards a more controlled and regulated market, there are valuable lessons for other markets worldwide to consider.
A New Regulatory Framework
In January, Brazilian President Luiz Inacio Lula da Silva ratified a new regulatory framework for sports betting and iGaming, marking a significant milestone for the country's gaming industry. This move followed the endorsement of the bill by Brazil’s chamber of deputies in December. The inclusion of iGaming, which had previously been removed by the senate, underscores the government's commitment to a comprehensive regulatory approach.
Under this new framework, the first online licensing window opened and will close in August, with a licensing fee set at BRL30m ($5.5m). The legal online gambling sector is expected to be live by January 1, 2025, according to the regulator’s timeline. Although not all current operators will be able to afford this fee, the move is seen as a critical step towards regulating the market effectively.
The Role of Payment Methods
One of the key strategies being considered by the Brazilian government to regulate the market is the restriction of popular payment methods for unregulated operators. The payment method Pix, controlled by the National Bank, is a cornerstone of this strategy. Pix enables transactions to occur in less than 10 seconds and is used by 99% of the market. By blocking unregulated operators from using Pix, the government aims to significantly hinder their operations. This approach is seen as a fair and effective method to steer players towards regulated platforms.
Licensing and Market Dynamics
While the high licensing fee may be prohibitive for some operators, it is designed to ensure that only serious and well-capitalized firms can enter the market. So far, only one operator has applied for a license, but it is expected that up to 25 firms will apply before the closing date. This move towards a regulated market is anticipated to drive mergers and acquisitions, as firms seek to consolidate and strengthen their positions. For instance, MGM Resorts’ acquisition of Tipico’s US sportsbook platform is seen as a strategic move to enhance its online efforts in Brazil and the rest of Latin America.
The Impact on Offshore Books
The regulatory measures being implemented in Brazil are expected to significantly impact offshore books. By limiting their access to essential payment methods and imposing strict licensing requirements, the government aims to reduce the presence of unregulated operators. While the grey market may never be completely eliminated, these steps are crucial in shifting the majority of the market towards regulated platforms.
Lessons for Other Markets
Brazil's approach to regulating its gaming market offers several lessons for other countries considering similar measures:
Comprehensive Legislation: A well-rounded regulatory framework that includes both sports betting and iGaming ensures that all aspects of the market are covered.
Payment Method Control: Restricting access to popular payment methods can effectively limit the operations of unregulated operators.
High Licensing Standards: Setting high licensing fees and requirements can help ensure that only serious and financially stable operators enter the market.
Strategic M&A: Regulation can drive industry consolidation, leading to stronger and more competitive market players.
Stakeholder Engagement: Ensuring that all government departments and stakeholders are aligned is crucial for smooth and effective implementation.
Conclusion
As Brazil prepares to launch its regulated online gambling sector, it is setting a precedent for other markets worldwide. The country’s strategic approach to regulation, focusing on payment method control, high licensing standards, and market consolidation, provides a roadmap for effectively managing and regulating the gaming industry. By learning from Brazil’s experience, other markets can better navigate their regulatory journeys and ensure a controlled, profitable, and secure gaming environment.
Brazil's journey towards a regulated gaming market underscores the importance of maintaining control and sovereignty over gaming operations. As we move forward, it is crucial for other markets to consider these strategies and adapt them to their own regulatory frameworks, ensuring a balanced and thriving gaming industry.