In a historic decision, the Brazilian government has set a deadline of December 2024 for gaming operators to secure their licenses or face severe penalties starting January 1, 2025. This requirement is detailed in the new Normative Ordinance 827, published in the Official Gazette of the Union on May 21, 2024. Altenar has launched a special guide for operators wishing to enter the local market.
Normative Ordinance 827 outlines the essential steps for obtaining sports betting and gaming licenses in Brazil, marking the beginning of an "adjustment period" for operators. Companies active in the gaming sector have until December 31, 2024, to align with the new regulatory framework or face the consequences. Priority will be given to applications submitted within 90 days after the publication of the ordinance completed on the last day of August 20.
This ordinance (SPA/MF No. 827/2024) is part of the broader strategy of the Ministry of Finance to finalize the regulations for the implementation of fixed-odds betting in Brazil through a four-step process. Collectively, they aim to establish a foundation for legal betting activities in Brazil.
The first stage, as described in Ordinance 827, established the technical, security, and payment requirements that operators must follow, setting the rules for operating fixed-odds betting activities within the country's borders.
The second, third, and fourth stages, planned for the end of May, June, and July, respectively, aimed to address money laundering prevention and fraud, procedures for monitoring gambling advertisements, and procedures for allocating contributions to socially responsible causes.
Implications of Ordinance SPA/MF No. 827/2024
The new Brazilian ordinance shakes up the iGaming industry with stringent data and operational requirements. The norm requires that all betting systems and data centers used by operators be located within the country, highlighting Brazil's commitment to maintaining control over betting data. Exceptions are only allowed if the data centers are in countries with an international civil and criminal Cooperation Agreement with Brazil and in compliance with its data protection laws.
Additionally, the new regulation requires operators to grant full system access to inspectors from the Secretariat of Prizes and Bets (SPA), ensuring meticulous compliance. This obliges operators to establish local infrastructure and secure third-party certifications for their betting systems. The use of the domain “bet.br” further reinforces the focus on localization.
Possible delays in granting licenses
While some sources suggest that licenses may be issued by the fourth quarter of 2024, with operations starting in January 2025, others point to potential delays. Initial application guidelines, expected in April, faced setbacks. Despite a lawyer describing the schedule as "challenging," the Ministry of Finance remains optimistic, encouraged by an expected increase in the number of employees at the SPA.
“I expect a significant expansion of the workforce at the authority in the coming weeks to meet the deadline,” commented the lawyer, noting parallels with staffing increases in other sectors, such as finance.
Further fueling the debate, some commentators have expressed concern that the new regulations may cause regulatory bottlenecks. The authorized testing agency Gaming Laboratories International, for example, expressed concern that the large volume of applicants could slow down the process, citing a call for interest in January that resulted in 134 responses from local and international operators.
Despite the current volatility and, at times, lack of clarity, Brazil's online betting market has enormous potential. With its substantial market size, a growth of 15% per year is forecasted for the coming years, which could increase even further with a robust regulatory framework in place.
Companies such as bet365, Betfair, and Betsson are pointed out as the most likely to capitalize on the regulated market, leveraging their international experience and compliance capabilities. However, it is worth noting that the involvement of these brands in the market is predominantly speculative and not based on concrete evidence.
Regulatory challenges for international operators
To get involved, foreign operators face several challenges. They must first establish a local subsidiary with at least 20% Brazilian ownership, which can be fulfilled by the participation of a Brazilian national or by a company based and managed in the country.
The positive aspect of recent events is the additional confirmation of Brazil's intention to stay the course in building a regulatory framework for online gambling. The completion of this process will open up great opportunities for international companies in 2025 and the following years.
Applicants also need to demonstrate a solid financial reserve of at least R$ 5 million, prove their qualification to operate, and provide compliance statements certified by the Central Bank of Brazil. Once approved, licensed operators secure a five-year license for a fee of R$ 30 million, granting the ability to operate under three domains.
Steps for compliance before the end of 2024
To operate legally in Brazil by the end of 2024, iGaming operators must follow these steps:
1. Understand the requirements: Familiarize yourself with Ordinance 827 and future ordinances to anticipate regulatory requirements.
2. Assess readiness for compliance: Conduct a comprehensive review of operations to identify areas of non-compliance and prioritize correction efforts.
3. Build local infrastructure: Establish data centers in Brazil or ensure rigorous compliance for foreign centers.
4. Develop compliance policies: Implement compliance policies and procedures to ensure adherence to regulatory guidelines.
5. Acquire essential certifications: Secure certifications from accredited third-party entities for betting systems.
6. Domain registration: Operate under the domain “bet.br” to align with local regulatory requirements.
7. Prepare for scrutiny: Be ready to grant SPA inspectors full system access for rigorous compliance checks.
8. Submit detailed reports: Provide comprehensive technical compliance assessment reports within 90 days of SPA authorization.
9. Follow phased regulations: Adhere to the phased implementation of additional ordinances, addressing responsible gaming practices, licensing, and anti-money laundering.
Immediate action before the authorization deadline
Starting January 1, 2025, companies operating in Brazil without authorization from SPA/MF will be subject to penalties, and payment providers will not process betting transactions from unauthorized operators.
For iGaming companies in Brazil that were operating when law No. 14.790/2023 was published, authorization must be obtained by December 31, 2024. Therefore, operators had to submit an application by, at the latest, August 20 to ensure that it is granted, meeting all the requirements of the ordinance. With this deadline already passed, operators can still apply, although there is no guarantee of obtaining a license before the new regime takes effect.
Contact Altenar to learn more about the opportunities and challenges shaping the future of online betting in Brazil and the LatAm region!
Source: Altenar Blog
