As the deadline for prioritized licence applications in Brazil has now passed, a total of 113 operators have submitted their requests, aiming to secure a foothold in the country’s soon-to-launch legal betting market. By meeting the deadline of August 20, these operators have ensured their applications will be processed in time for the anticipated launch date of January 1, 2025.

The initial window for applications, which spanned 90 days starting in May, initially saw a slow uptake. By the end of June, only Betano, owned by Kaizen Gaming, had submitted an application, leading to concerns that the number of applicants might fall short of expectations. However, the release of critical ordinances, including the much-anticipated Normative Ordinance No. 1,207, which clarified the types of online games that would be permitted, sparked a surge in submissions. In fact, 108 of the 113 applications were filed after the final ordinance on sanctions was issued on July 31.

Although the number of applications did not reach the 134 operators who initially expressed interest earlier this year, Neil Montgomery of Brazilian law firm Montgomery & Associados believes the final tally is still a significant success. “The prizes and betting secretariat (SPA) of the ministry of finance must have released fireworks in Brazil when the tally of applications for a federal licence comfortably surpassed 100,” Montgomery remarked to iGB. He further noted that the total number of applications far exceeded the SPA’s initial expectation of around 40, which is encouraging for the Brazilian government as it reflects strong interest in the regulated market.

Significant Interest Despite High Costs and Regulatory Hurdles

The excitement surrounding Brazil’s gambling industry is not unwarranted. A recent report from the International Betting Integrity Association (IBIA) predicted that the market could generate $34 billion in sports betting turnover by 2028, with an onshore gross win of $2.8 billion. This potential has driven operators to apply for licenses despite facing significant financial and regulatory challenges. The BRL30 million license fee, equivalent to approximately $5.5 million, along with stringent requirements for accreditation and ongoing maintenance, have raised concerns about the viability of smaller operators entering the market.

Udo Seckelmann, head of gambling and crypto at Bichara e Motta Advogados, believes the high number of applications reflects the immense potential of the Brazilian market. “This clearly shows that the igaming industry in Brazil craves for a professional environment, with clear rules and legal certainty,” Seckelmann stated.

Uncertainty Surrounding the Application Review Process

Despite the enthusiasm, there are still questions about whether the application review process will be completed by the January 2025 launch date. The final regulations were issued just three weeks before the application deadline, leaving the SPA with only a little over four months to process the large volume of applications.

Neil Montgomery shared insights from a recent meeting with the federal regulator, where it was revealed that the SPA plans to contact applicants within 35 days of submission to inform them whether their documentation is in order or if additional adjustments are needed. This step is crucial before the applications are forwarded to the Ministry of Sports for further review.

Seckelmann also suggested there might be some flexibility in the “transition period” for operators to gain authorization, allowing the regulator sufficient time to scrutinize the applications thoroughly.

Challenges in Combatting the Black Market

Another concern within the industry is whether the new regulations will be effective in eliminating the black market. The IBIA study cautioned that strict market restrictions in Brazil could lead to as much as $18 billion annually being wagered offshore, potentially resulting in over $1 billion in lost tax revenue between 2025 and 2028. Seckelmann expressed a cautious outlook, stating, “We will have to wait and see whether the federal government will stick to its promise of fiercely enforcing the current legal framework against the black market as from 1 January 2025.”

Normative Ordinance No. 827 clarifies that operators without a licence by the start of the new year will face sanctions, but the effectiveness of these measures remains to be seen.

Ongoing Opportunities and State Lottery Licences

Despite the demanding compliance requirements, some operators might opt to delay their entry into the market. Montgomery noted that some major players might be waiting to see how the market develops before committing to the federal licence process. In the meantime, state lottery licenses, such as those offered by Rio de Janeiro’s Loterj, present an alternative. While these licenses are less costly and less demanding, they have sparked controversy over their legality, as Loterj allows license holders to operate nationally, which some argue oversteps its jurisdiction.

Montgomery highlighted that this state license route might be attractive to some operators, and with Loterj reportedly receiving nearly 50 requests during its latest application window, it seems this option is gaining traction. However, the legality of this approach is currently under challenge in court, and it could be some time before the issue is resolved.

Economic Benefits and Revenue Targets

Amid concerns about gambling addiction and opposition from evangelical groups, proponents of legal betting in Brazil emphasize the economic benefits. While the full impact of tax revenues won’t be felt until 2025, the license fees alone will provide a significant boost to the government’s finances in 2024. “In general terms, if all licenses are ultimately approved and issued, this will represent a significant financial contribution to the federal government’s coffers still in 2024,” Montgomery commented.

The number of license applications is seen as a positive indicator of the effectiveness of the government’s regulatory efforts. Montgomery suggested, “This is confirmation that the Brazilian government has done a good job in attracting as many players to the regulated market as possible.” However, he also cautioned that the experience of the US market, where heavy investments did not always lead to profitability, should serve as a warning that not all new markets may meet expectations.

Source:

“Priority window closes for Brazil licence applications as 113 apply in total”, igamingbusiness.com, August 21, 2023.

The post Brazil’s Betting Market Attracts Over 100 Licence Applications Before Deadline appeared first on Casino News Daily.