Prioritised betting licence application window shuts in Brazil

The window for prioritized license applications in Brazil has officially closed, resulting in 113 operators submitting requests ahead of the deadline, generating significant anticipation as the market gears up to launch.

By meeting the 20 August application deadline, these 113 operators have secured their applications to be processed by the projected market launch on 1 January 2025, marking a pivotal point for Brazil’s legal gambling framework.

The initial preferential application period, which opened in May, initially underwhelmed industry observers, with only Kaizen Gaming’s Betano submitting a bid by the end of June. However, a surge in submissions occurred following the release of crucial ordinance regulations, particularly the Normative Ordinance No 1,207, which outlined permissible online gaming activities. A notable 108 of the 113 applications were submitted post the final ordinance announcement on 31 July.

Although the total number of applications fell short of the 134 operators previously expressing interest, industry expert Neil Montgomery of the Brazilian law firm Montgomery & Associados believes the results have nonetheless exceeded government expectations. “The Prizes and Betting Secretariat (SPA) within the Ministry of Finance must have been pleased when the application count surpassed the 100 mark,” Montgomery remarked to iGB. “The SPA had anticipated about 40 applications, making this influx a positive indicator of market interest in Brazil.”

Significant Interest in the Brazilian Betting Market

The Brazilian gambling market is poised to emerge as one of the most dynamic globally. A recent report by the International Betting Integrity Association (IBIA) forecasts that sports betting turnover in Brazil could reach $34 billion (£26.8 billion / €31.1 billion) by 2028, with an estimated onshore gross win of $2.8 billion.

The high volume of applications is especially telling against a backdrop of significant regulatory hurdles, including a steep BRL 30 million (£4.2 million / €4.9 million / $5.5 million) license fee and rigorous compliance requirements. Despite concerns about the challenges for smaller operators entering the market, Udo Seckelmann, head of Gambling & Crypto at Bichara e Motta Advogados, believes the robust interest reflects the undeniable potential within Brazil’s gambling landscape. “This surge in applications demonstrates a clear demand for a professional framework characterized by established regulations and legal certainty,” Seckelmann noted.

Will the Review Process Run Smoothly?

Despite the optimism, there are legitimate concerns regarding potential delays in Brazil’s journey toward legalized betting. Industry stakeholders are apprehensive about whether the application review process will align with the 1 January 2025 launch date.

Following the final regulations’ publication just weeks after the application deadline, the SPA now faces the challenge of evaluating over 113 applications within a limited timeframe. Montgomery, who recently met with federal regulators, shared insights on SPA’s approach: “The SPA plans to contact applicants within 35 days of submission to confirm the completeness of documentation or request additional information before forwarding applications to the Ministry of Sports for review.”

Seckelmann suggests that the SPA may exhibit flexibility during the “transition period” to ensure thorough scrutiny of each application.

Challenges and Concerns

In addition to the review process, stakeholders are concerned about the efficacy of regulations in curbing illegal gambling activities. IBIA’s studies suggest that stringent regulations could push $18 billion annually into the offshore betting market, compromising player protection and resulting in an estimated loss of over $1 billion in tax revenue from 2025 to 2028.

Seckelmann emphasizes the importance of the Brazilian government effectively managing offshore operations. Normative Ordinance No 827 clarifies that operators without licenses by the start of 2025 will face sanctions. “We await to see if the federal government will uphold its commitment to stringent enforcement of the existing legal framework against the black market starting on 1 January 2025,” he stated. “The SPA has assured that it will have the necessary resources to tackle this issue.”

Ongoing Opportunities in the Market

The substantial number of applications has caught Montgomery’s attention, especially in light of the complex compliance demands. He noted that one significant multinational operator opted out of the application process due to the prohibitive costs and licensing stipulations. While operators can still apply for licenses post-deadline, they may forego the initial excitement associated with entering a newly legalized market like Brazil.

“We may see prominent players hold off on applying at this juncture, but this does not preclude them from pursuing licensure later,” Montgomery explained. “Some operators are adopting a wait-and-see strategy before making a final decision.”

Exploring State Lottery Licenses as an Alternative

There exists an intriguing alternative to federal licensure through state lottery licenses. Regions such as Paraná and Paraíba have approved sports betting and gaming licenses, with Rio de Janeiro’s state lottery, Loterj, frequently dominating discussions in the sector.

Loterj has faced criticism for perceived overreach by allowing license holders to operate nationally, offering a “much cheaper and less demanding” licensing option, as described by Montgomery. Notably, Loterj had reportedly received nearly 50 applications by the close of its recent window, despite ongoing legal challenges regarding the legality of its operations. “While Loterj’s extraterritoriality claims are under judicial review, the unsettled status may mean that a state license could still offer operational advantages for holders,” Montgomery theorized. “For those disinterested in pursuing federal licensing, Loterj may soon open another application window to attract diverse operators.”

Brazil Government’s Revenue Targets

Amid criticisms grounded in concerns over gambling addiction, proponents of legalized betting in Brazil underscore the economic benefits as a key argument for regulatory acceptance. While the full fiscal impact of tax revenues won’t be realized until 2025, the upfront licensing fees promise immediate enhancements to governmental coffers.

“If all pending licenses are ultimately approved, the resultant revenue will represent a substantial financial gain for the federal government, potentially felt as early as 2024,” Montgomery predicted. “The government is poised to welcome the influx of applications, with each license carrying a cost of BRL 30 million.”

Montgomery views the applications count as indicative of successful regulatory implementation aimed at bolstering state revenues. “This reflects that the Brazilian government has effectively attracted numerous players into the regulated market,” he concluded. “They are likely on a positive trajectory to meet their revenue objectives.”

However, this is merely the beginning. The enthusiasm surrounding Brazil’s forthcoming legalized market can be tempered by looking to the U.S. as a cautionary tale. High-profile names such as 888, Super Group, Wynn, and Kindred have exited the market after substantial investments yielded disappointing returns. This serves as a vital reminder that exciting new markets may not always unfold as anticipated. “Our next step is to observe how these operators fare and whether they can sustain operations within Brazil,” Seckelmann summarized.