Was the Pixbet licence suspension in Brazil disproportionate?

Brazilian legal expert Fabio Ferreira Kujawski has labeled the recent decision by the Secretariat of Prizes and Bets (SPA) to suspend Pixbet’s operating license as “disproportionate,” indicating a concerning disconnect between regulatory actions and the complexities of the gambling sector.

On April 11, the SPA enacted a suspension of the online gambling licenses for Pixbet Technological Solutions, Caixa Lotteries SA, 7MBR Ltda, and Tqj-Par Participações Societárias SA, invoking Normative Ordinance No 787. This bold move comes in response to alleged violations of Article 3 of Normative Ordinance No 2,104, which pertains to the mandatory presentation of technical certifications required for lawful operations within Brazil’s betting market.

The SPA charged these operators with failing to submit the necessary certifications, a critical element for legal participation in the betting landscape. In an unexpected turn, Pixbet expressed surprise following the suspension, only for a federal court to subsequently reinstate the license just hours later. Judge Anderson Santos da Silva overturned the SPA’s decision after evaluating a “writ of mandamus” submitted by Pixbet, which argued that three of the required four documents had been submitted on time, with the final integration certificate provided just prior to the suspension.

Kujawski, a partner at the prestigious Brazilian law firm Mattos Filho, contends that the SPA’s punitive action could signal a worrisome lack of understanding and communication within the regulatory body, particularly given that Brazil currently recognizes only six authorized gambling certifiers. “We believe that the suspension of the authorization was an excessive response to the cited infraction,” Kujawski stated in an interview with iGB. “Suspension should only be considered in instances of severe and repeated violations of Brazilian law. Other corrective measures, such as warnings or fines, should be prioritized before considering suspension.”

### SPA’s First Major Regulatory Action

This suspension represents the SPA’s inaugural exercise of stringent regulatory enforcement against operators, as stipulated in Normative Ordinance No 1,233, published in July. This ordinance grants the regulator the authority to revoke licenses in the most severe cases of noncompliance. Additionally, the SPA has the ability to impose fines ranging from 0.1% to 20% of an operator’s revenue from the previous year, capped at BRL 2 billion (approximately $353,678).

Kujawski emphasizes the importance of the SPA asserting its authority to prevent other consumer protection agencies from stepping in to address potential regulatory voids. However, he cautions that the regulator must exercise restraint, advocating for a balanced approach. “The SPA must not transform into a body that imposes sanctions in a disproportionate manner or adopts an overly aggressive posture against the industry it regulates,” he warns. “There needs to be equilibrium between vigilance and fairness.”

### Reputational Consequences for Pixbet

The impact of the suspension on Pixbet extends beyond legal ramifications; the company has described the initial revocation of its license as both “illegal and disproportionate,” asserting the action has inflicted considerable reputational and financial harm, particularly regarding its BRL 470 million sponsorship deal with Brazil’s top-tier football club, Flamengo.

Kujawski supports this assertion, acknowledging that while the damage to Pixbet’s standing in the market has been contained, it remains significant. “I believe the incident had a manageable impact. However, it could have escalated into a more severe situation,” he noted. “Once again, I stress that a mere deficiency in a technical certificate should not warrant the suspension of an operating license.”

Interestingly, 7MBR Ltda also saw its license reinstated shortly after suspension, while Caixa Lotteries and Tqj-Par Participações Societárias remain in a state of suspension. Both entities have announced plans to launch their licensed betting services in 2025, albeit without securing all required documentation as of now.

When asked about the rationale for pursuing authorization despite not yet launching their offerings, Kujawski pointed to the protracted nature of the licensing process. “One of the most challenging aspects of obtaining authorization has been securing technical certifications for platforms and games, driven by the heavy workload faced by certifying entities,” he explained. “Many operators have acquired licenses but are still in the process of refining their systems and games ahead of going live.”

### Conclusion

As the Brazilian gambling landscape evolves, regulatory scrutiny is intensifying. Stakeholders must navigate this complex environment with an understanding of both regulatory expectations and market dynamics. The SPA’s recent actions underscore the urgent need for a balanced regulatory approach, fostering compliance while supporting the industry’s growth and reputation.