Influx of Brazil licence applications as enforcement deadline passes

As Brazil embarks on a critical transitional phase in its online gaming landscape, the deadline for operators to submit license applications has officially closed, resulting in a total of 182 requests by the cut-off of 11:59 PM on September 30.

In mid-September, the Brazilian government issued Normative Ordinance No. 1,475, outlining stringent enforcement measures aimed at operators who missed the October 1 deadline for licensing applications.

Only those companies actively operating and having submitted a license application will retain the right to continue their operations during the transition period from October 1 to December 31, as Brazil gears up for the formal launch of its regulated online gaming market on January 1, 2025.

This current deadline marks the second significant licensing milestone for Brazil. The first occurred on August 20, concluding a 90-day preferential application window in which 113 operators secured their applications for processing by the Secretariat of Prizes and Bets (SPA) ahead of the imminent legal market launch.

The announcement of the October application deadline sparked a late surge in submissions, with nearly 70 additional companies filing requests, bringing the total to 182. Notably, most companies acted swiftly, though Tecnologia e Desenvolvimento Ltda submitted its application on October 1, thereby missing the official deadline.

Applicants were required to inform the SPA, under the Ministry of Finance, regarding the brands and domains they intended to operate throughout the transitional period.

What Are the Consequences for Companies That Did Not Apply for a Brazil License?

Companies that failed to meet the licensing deadline will face significant repercussions. Their websites are set to be blocked starting October 10, and they must provide customers with the opportunity to withdraw funds before this shutdown occurs.

On September 30, Brazil’s Minister of Finance, Fernando Haddad, forecasted that between 500 and 600 online betting sites would be blocked post-deadline.

It’s also crucial for operators who applied for a license but are not yet operational in Brazil to recognize that they must wait until January 1 to commence activities, pending authorization.

Moreover, Normative Ordinance No. 827, published in May, clearly states that operators functioning without the necessary federal license will face stringent penalties beginning January 1, 2025. The most recent ordinance, Normative Ordinance No. 1,233, elaborated on these penalties, which can include fines reaching up to BRL 2 billion (approximately £275.1 million/€330.4 million/$367 million) and a prohibition from applying for licenses or accreditations for durations extending up to ten years.

While these strict sanctions are set to come into effect in 2025, current expectations suggest that the SPA will implement site-blocking measures in the interim.

Legal experts Eduardo Carvalhaes and Karen Coutinho from the Brazilian law firm Lefosse believe that the newly emphasized October deadline could substantially mitigate concerns regarding illegal operators that have long plagued the gaming sector.

“The market anticipates that this strategic approach will expedite the removal of non-compliant companies from the market, transitioning the removal timeline initially set for January 2025 to October,” Coutinho and Carvalhaes noted in a statement to iGB.

Increasing Scrutiny of Brazil’s Betting Market

As the launch of regulated sports betting in Brazil approaches, the sector is facing escalated scrutiny from government officials, largely due to concerns about the proliferation of black market operations and the potential for gambling addiction, amplified by adverse media coverage.

Recent research from the Brazilian Society of Retail and Consumption (SBVC) has raised alarms, suggesting that bettors are reallocating funds typically reserved for essential needs, such as clothing and healthcare, towards gambling activities.

Despite the study’s limited sample size and its contentious conclusions, its findings have garnered significant media attention and provoked heightened concern among policymakers.

Compounding this issue is the persistence of illegal gambling, with industry figures from Yield Sec suggesting that legitimate onshore operators may only account for around 9% of Brazil’s overall online gambling market.

However, legal advisors Carvalhaes and Coutinho maintain that the impending October deadline will bolster efforts to address concerns related to the black market and potential adverse consumer impacts.

“The suspension of unlicensed betting companies serves as a crucial mechanism for expediting the identification of compliant versus non-compliant operators, effectively preempting issues initially intended to be addressed commencing in January 2025,” they stated in September.

“This strategy also seeks to enhance oversight over the operations of sports betting in Brazil, thereby ensuring that the services provided prioritize the mental, financial, and physical well-being of consumers.”