The impacts of the new ordinances on sports betting regulation in Brazil

With the recent approval of Law 14.790 of 2023, Brazil is on the verge of a revolution in the sports betting scene. It is estimated that this market generates around R$10 billion annually in the country, which represents a vast revenue potential for the economy. To date, there have already been more than 100 applications from national and foreign operators interested in entering this market, which projects a maximum grant fee of R$30 million to the Federal Government to exploit the activity.

Published in April, SPA/MF Normative Ordinance 615 establishes strict rules to ensure the transparency, legality and integrity of the commercialisation of fixed odds betting by private economic agents throughout the country. One of the main determinations of this ordinance refers to contributions and withdrawals, which must be made exclusively via electronic transfer (such as Pix, TED, debit or prepaid card), excluding the use of cash, slips, cheques, cryptoassets and credit cards.

With regard to withdrawals, they must be processed within 120 minutes of the bettor's request and prizes must be paid out within 120 minutes of the event's closure, providing a more agile and reliable experience for users. With these requirements, the ordinance creates a regulated environment where fintechs can provide secure and fast solutions for payment processing, account management and financial risk mitigation, guaranteeing the integrity and reliability of the sports betting market in Brazil.

Another highlight is the requirement for punters' funds to be kept in transactional accounts segregated from the assets of the operating agent. In other words, players' funds must be kept separate from the betting company's assets, preventing them from being used for purposes other than paying out prizes or placing bets. This ensures greater protection of funds in the event of financial problems faced by the operator, preventing players from being jeopardised by debts or other obligations of the company.

More recently, the SPA/MF Normative Ordinance No. 827 was published in addition, detailing the transparency, legality and integrity requirements for private economic agents who carry out the commercial exploitation of fixed odds betting. In this context, the main point is the need to prove legal capacity in order to obtain authorisation, providing for the presentation of the articles of association, internal organisation chart and organisational structure. Legal certainty, in turn, also includes proof of a minimum financial reserve of R$5 million and a paid-in share capital of R$30 million. Tax and labour compliance, good repute, as well as technical and economic-financial qualifications complete the criteria established for authorisation analysis.

The speed of this verification will benefit: for those who submit their applications within the first 90 days of publication, the granting of authorisations will be published by 31 December 2024. This timetable provides predictability and security for interested parties, who will be penalised if they fail to comply with the new rules by the end of 2024: from 1 January 2025, any operation without the appropriate authorisation will be subject to sanctions, reinforcing the government's seriousness in regulating and supervising the sector. Success in the new environment, then, depends on the ability to adapt to the new responsibilities that arise.

The regulations also require the presentation of a code of conduct and the dissemination of good advertising and publicity practices during the technical qualification, with the aim of guaranteeing the promotion of conscious consumption by the target audience, without jeopardising the financial health of the bettors. All these implications, which are already quite significant for the sector, open doors to opportunities in the fintech ecosystem. With agility, adaptability and a focus on technology, fintechs will be able to act as operating agents and/or providers of a variety of services, from payment processing to risk management.

In summary, the updates brought in by Ordinances 615 and 827 are important steps towards the professionalisation and legalisation of the betting market in Brazil. Implementing these measures will require a significant effort on the part of companies in the sector, but on the other hand, it is a step forward in bringing Brazil into line with the best international practices in gambling regulation. As the country prepares for this new chapter, fintechs have the opportunity to play a crucial role in building an equitable, safe and beneficial ecosystem for all involved, contributing to the economic growth and sustainable development of this market.

By Diego Pérez