With House Bill, Brazil Moves Closer to Legal Gaming

For 30-plus years, Brazil has considered legal gambling. Now lawmakers are tantalizingly close to passing legislation. Last week, the House voted yes. Bill sponsor Felipe Carreras (l.), says the industry could bring in $3.9 billion in annual tax revenues and generate 200,000 jobs across Brazil.

With House Bill, Brazil Moves Closer to Legal Gaming

Talk about persistence. More than 30 years ago, Brazilian lawmakers introduced Bill 442/91 to legalize a popular game known as Jogo do bicho. Some 37 amendments later, and the Brazilian government is on the verge of sending a far-reaching, comprehensive legal gaming bill to President Jair Bolsonaro.

The legislation took another step forward on February 23, when the Chamber of Deputies voted to approve the proposed law in a 246-202 vote. The Senate still has to agree before it goes to Bolsonaro, who may not sign it anyway.

Congressman Sóstenes Cavalcante, president of the evangelical parliamentary front, came out swinging against the proposal. He said a legal gaming industry would “affect in particular the lives of the poorest, the retired, who are the first to develop compulsion, gambling addiction. The legalization of gambling is a disaster for the families of Brazilians.

The evangelical caucus hopes Bolsonaro will veto the bill when it arrives at his desk, as he has asserted he would do.

“What I’ve already decided here, the entire House knows, the presidents of the House and the Senate also know: once approved, we will exercise our right of veto,” said Bolsonaro in his weekly social media discussion.

Not to worry, however, as the Senate supposedly has the votes to override the veto, if it approves the bill first.

Federal Deputy Felipe Carreras, who drafted the latest version of the bill, believes legal gaming could bring in $3.9 billion in annual taxes and generate more than 200,000 jobs across Brazil.

To bring that about, Carreras accepted the creation of a regulatory entity that will answer to the Ministry of Economy and that will be in charge of authorizing and licensing gambling activities.

Meanwhile, Carreras added, a regulated industry will protect players from harm, not add to their risk.

“The regulation will allow the state to collect more taxes through the exploitation of games and betting, and will ensure greater resources for the implementation and development of social public policies of the states and municipalities, reinforcing our fiscal federalism,” he said.

Let’s get to the nuts and bolts. And there are a lot of them.

The law establishes casinos as part of integrated resorts in each of Brazil’s 26 states. That means hotels with at least 100 rooms, places for holding meetings and social events, restaurants and bars, and shopping centers. The casino will occupy, at most, 20 percent of the total area of the leisure complex.

Based on population, São Paulo could have up to three casinos, Rio de Janeiro, Minas Gerais, and Bahia could have up to two casinos each, and other Brazilian states could have one casino each. No operator may be granted two licenses in the same state, or more than five overall. In locations classified as tourist centers or destinations, the installation of a casino will be allowed, regardless of the population density of the state in which they are located.

Casinos can have table games and electronic gaming machines and must return at least 80 percent of its bets as winnings.

To minimize profits ending up overseas, licensed companies must be incorporated under Brazilian law, with their headquarters and management based in the country. They must be proficient in operating a casino and have the financial capabilities as well. The Ministry of Tourism will organize the policy for regulating, supervising, and inspecting gambling activity in the country, according to Games Magazine Brasil. To run a casino, potential operators must obtain authorization and a license.

Online games of chance would also be allowed, with both the federal government and states issuing licenses, according to iGaming Business.

Bingo can be held in bingo halls and also in stadiums with a capacity for over 15,000 people, with an extended concession period from 20 to 25 years. Bingo houses will be able to offer card bingo or electronic bingo, including video bingo. They can have a maximum of 400 machines. The bill admits one bingo house for every 150,000 inhabitants in the municipality where the establishment operates. Bingo room operators must be incorporated under Brazilian law, with headquarters and management in Brazil. Bingo houses must have a minimum capital of R$10 million (US$1.95 million). The payout for the operation of bingo and video bingo games was kept at a minimum of 80 percent of the total stakes.

In addition to paid prizes, operators must transfer 0.68 percent of the gross revenue directly to the financing of the training of athletes for the Olympics and Paralympics. Of this percentage, 0.48 percent will be allocated to the Brazilian Committee of Clubs and 0.2 percent to the Brazilian Committee of Paralympic Clubs.

Cide-Jogos, which is a contribution for intervention in the economic domain, whose value is 17 percent of the gross revenue with allocations as follows: 10 percent of the 17 percent goes to the Brazilian Tourist Board; 10 percent to finance programs and projects in the area of sport; 6 percent for funding programs and actions within the scope of the National Policy for the Protection of Players and Bettors; 6 percent to fund health programs and actions related to gambling; 6 percent for the National Public Security Fund; 10 percent for the National Culture Fund; 6 percent for the National Fund for Children and Adolescents; 20 percent for the State Participation Fund; and 20 percent for the Municipal Participation Fund.

Bingo operators will pay a fee of R$20,000 per licensed establishment. Online gaming will pay R$600,000 per licensed domain. Casinos, R$600,000 per licensed establishment.

“With the growth of online betting, there is competition between jurisdictions (a Brazilian can easily place bets on foreign sites). These factors make the sector have high tax-amendment elasticity, so that the size of the market is quite sensitive to the weight of taxation,” Carreras said.

Unlicensed foreign websites would be blocked, and servers for locally licensed iGaming operators must be in Brazil.

Regarding the casinos, license decisions will be made through a technical tender, with the highest bid obtaining the license with paid-in capital of R$100 million.

Jogo do Bicho, a popular but until now illegal game, would also be permitted. The game operates much like a lottery. Under the legislation, one operator would be allowed for every 700,000 residents in each state and the Federal District. For states with fewer than 700,000 inhabitants, only one operator will be authorized. The license will be through a bidding process, with a minimum value equivalent to the paid-in capital of R$10 million.

Credit will not be available to gamble online, and gambling winnings will be taxed at 15 percent. Legislation also requires lottery proceeds go towards funding social security programs. A contribution of 17 percent on the gross gaming revenue resulting from the activity and the incidence of income tax of 20 percent on the net prize equal to or greater than R$10,000

Efforts to allow sports betting has taken time as lawmakers debated the operational details, concessions, licensing and other issues.

Bolsonaro formally added sports betting to the country’s agenda in August 2020. Last year, the Brazilian federal government approved changes which will involve a tax system based on gross gaming revenue.

Raffles, games and bingos held by philanthropic and religious entities and by Santas Casas that aim to raise funds, exclusively for the maintenance of their social and philanthropic activities, would not be subject to the provisions of this law.