Does Flamengo’s Flabet show how teams can become operators?

Flamengo’s Launch of Flabet: A Game-Changer for Sports Betting in Brazil

Brazilian football club Flamengo’s recent initiative to launch the Flabet sportsbook is poised to set a significant benchmark for sports teams across the country. Legal experts Udo Seckelmann and Pedro Heitor de Araújo from Bichara e Motta Advogados assert that this strategic move could encourage other clubs to explore similar operational frameworks to augment their revenue streams.

Officially announced earlier this month, Flabet will be managed in collaboration with Pixbet, the club’s principal sponsor. This partnership means that, instead of merely deriving income through sponsorship deals, Flamengo will actively engage in the burgeoning Brazilian sports betting market.

The Flabet agreement, which runs until 2027, promises a minimum financial influx of BRL82.5 million (approximately £11.1 million, €13.2 million, or $14.7 million) for Flamengo. The payment schedule outlines BRL10 million in 2024, followed by BRL22.5 million in 2025, and escalating to BRL25 million in both 2026 and 2027. Additionally, Flamengo stands to benefit from a royalty of 1% of gross gaming revenue (GGR), should it exceed the guaranteed minimum.

“The model adopted by Flamengo with Flabet illustrates an innovative response to the complexities posed by current regulations,” Seckelmann and Araújo elaborate in their insights for Brazilian news portal Poder 360. “If replicated by other sports entities, this strategy could signify a pivotal shift—where the identification of regulatory loopholes becomes critical in optimizing revenue-generating avenues within the sector.”

Addressing Legal Challenges with Flabet

Following Flamengo’s deliberative council’s endorsement of the Flabet launch, legal uncertainties arose regarding its compliance with existing regulations. Normative Ordinance No. 827 specifies that only limited liability companies or corporations are eligible for operating licenses, an ordinance stemming from the Prizes and Betting Secretariat (SPA) of the Ministry of Finance and rolled out in a phased approach.

Given that Flamengo is registered as a civil association, this situation initially created barriers for Flabet’s national operation. The regulation further disallows significant shareholders or executives of betting operators from holding direct or indirect equity in professional sports organizations, effectively sidelining Flabet from federal licensing opportunities.

However, at the state level, the narrative shifts. Loterj, the lottery authority in Rio de Janeiro, does not impose the same restrictions on civil associations. Thus, the partnership’s brand licensing structure ensures compliance with state-level regulations while optimizing revenue potential for both Flamengo and Pixbet.

“This partnership model not only conforms to the betting legislation but also allows Flamengo to maximize its brand value, while Pixbet can leverage Flamengo’s widespread popularity to enhance its market position and grow its consumer base,” the legal experts further explain.

Future Prospects: Can Flabet Operate Nationally?

As a licensed entity in Rio de Janeiro, Pixbet acquired authorization from Loterj last year and is among the 113 operators who submitted applications for federal licenses during the initial 90-day window. This well-timed application ensures processing by the anticipated market launch in early 2025.

While Flabet may primarily operate within Rio de Janeiro, scrutiny has been cast on Loterj for permitting companies to extend their reach nationwide using state-issued licenses. The Brazilian Institute for Responsible Gaming (IBJR) has criticized Loterj, claiming these actions flaunt federal regulations.

“The measures taken by Loterj induce chaos, generate undue uncertainties, and threaten the efficacy of the fixed-odds betting regulation process in Brazil,” remarked the IBJR in an April release. Despite Loterj’s defense, insisting its regulatory approach serves state interests by monetizing the expansion of betting activities throughout Brazil, mounting legal challenges suggest that clarity in federal licensing is essential for protecting larger operators.

Ultimately, while Flabet is likely to be limited to operating within Rio de Janeiro, this market still presents a significant opportunity, granting access to over 16 million potential customers, making it Brazil’s third-most populous state.