Operators yet to request licences in Brazil suspended from October

Effective from October 1, Brazil’s treasury will initiate a suspension of operators that have not submitted applications for a betting license. Players will be afforded a 10-day period to withdraw their funds before any sites are deactivated.

In compliance with the newly enacted Normative Ordinance No. 1,475, Brazil’s government will strictly enforce regulations banning operators that have yet to apply for a betting license as of October 1.

Operators that have filed an application but are not yet active in the marketplace will be required to wait until January 1 to commence operations, contingent upon receiving their licenses. Conversely, those who have already submitted an application may continue their operations until the end of December, ahead of the official market launch on January 1.

A notable total of 113 betting applications were received during the 90-day initial window designated for submissions. Operators who applied during this period are assured license issuance by January 1. The Secretariat of Prizes and Bets (SPA), part of the Ministry of Finance, is currently reviewing these applications.

Without a valid license, operators will face severe repercussions as of January, including a fine of BRL 2 billion (approximately £269.8 million/€320.3 million/$354 million) and a prohibition on applying for a license for up to ten years.

Legal experts Eduardo Carvalhaes and Karen Coutinho from the Brazilian law firm Lefosse believe this regulatory measure will alleviate concerns among companies pursuing authorization amidst the ongoing challenge posed by illegal operators.

“Market expectations suggest that this action will expedite the removal of non-compliant companies from January 2025 to October,” stated Carvalhaes and Coutinho in communication with iGB.

Mechanics of the Suspension

For operators currently engaged in the market, applications for a betting license must be submitted by 11:59 PM on September 30 to prevent being barred from operations. As part of this process, operators must inform the SPA of their intended brands and domains during the transition period from October 1 to December 31.

Banned operators are mandated to offer players a ten-day window for fund withdrawals.

As of October 1, all legal operators are required to utilize the Bet.br domain, enhancing visibility and distinguishing legal sites from illegal ones. This domain shift will also enable the SPA to more efficiently identify unauthorized operators.

Lefosse has indicated that the impact on compliant operators will be “minimal.” However, those failing to adhere to regulations will encounter significant repercussions.

“Companies operating outside legal frameworks must swiftly suspend their activities and determine whether to comply with licensing requirements or withdraw from the Brazilian market,” they explained.

“Going forward, entities aiming to regularize their operations must promptly communicate their intent and either halt activities or risk penalties starting in October.”

SPA’s Confidence in October Deadline Restricting the Black Market

SPA head Regis Dudena has expressed that this regulatory adjustment is essential for combating illegal operators. “[A] number of police investigations concerning illicit activities in the betting market have come to light. Our approach is to promptly differentiate compliant from non-compliant entities,” he remarked.

The treasury will collaborate with various agencies, including the Ministry of Justice and Public Security, the Central Bank of Brazil, and the National Telecommunications Agency (Anatel), to ensure the deactivation of unlicensed sites by October 11.

Dudena asserts that this initiative is aligned with the SPA’s mission to “protect the mental, financial, and physical health” of consumers from illegal operators leveraging betting for fraudulent activities and money laundering.

Crackdown on Illegal Operators

In its campaign against the black market, the Brazilian government will restrict transactions involving offshore companies through Pix, an instant payment system regulated by the Central Bank and widely utilized in the betting sector.

Ari Celia, director of Pay4Fun, contends that these payment restrictions will effectively dismantle the black market due to the government’s control over Pix.

“If commercial banks become aware of clients engaging with illegal betting sites, they will promptly cease operations of those accounts upon receiving notification from the Central Bank,” Celia stated in an interview with iGB.

“Failure to comply could result in substantial fines, making it impractical for any bank in Brazil to maintain accounts associated with illegal activities once alerted.”

The government is also coordinating with social media platforms and the Central Bank to combat black market operators. Ongoing discussions with tech giants like Google and Meta aim to eliminate the presence of illegal operators from their platforms. Moreover, the government seeks to collaborate with internet service providers to identify and remove the web addresses of unlawful offshore betting sites.

Has Pressure Prompted Action from the Brazilian Government?

Dudena referenced recent police operations that led to arrests involving businesses accused of illegal betting practices. A prominent case is that of Esportes da Sorte, whose founder, Darwin Henrique da Silva Filho, along with his wife, was apprehended as part of ‘Operation Integration,’ which investigates allegations of money laundering and illegal betting activities.

Following these high-profile arrests, the Ministry of Justice announced its crackdown on a criminal syndicate believed to have facilitated nearly BRL 3 billion in illegal gambling and associated money laundering.

Additionally, the betting sector is facing scrutiny from the retail industry over concerns that Brazilian gamblers are redirecting funds from essential purchases, such as food and clothing, to support their gambling habits.

A controversial report by the Brazilian Society of Retail and Consumption (SBVC) claimed that 23% of individuals allocating part of their income to gambling have ceased purchasing clothing, while 11% reduced spending on healthcare and medications.

Coutinho and Carvalhaes emphasize that the impending October deadline will help mitigate concerns regarding the impact of gambling on consumer behavior and the prevalence of illegal operators.

“By suspending operators that have not applied for authorization, the government is expediting the identification of compliant and non-compliant businesses, a process initially set for January 2025.

“This move also aims to enhance oversight of sports betting operations in Brazil and the services provided to bettors, fundamentally prioritizing the protection of their mental, financial, and physical well-being.”