The text with the proposal to liberalise gambling in Brazil was approved in June by the Senate's Constitution and Justice Commission (CCJ), authorising the operation of bingo halls, gambling and casinos in the country.  

The president of the Senate, Rodrigo Pacheco (PSD-MG), announced on Thursday 28th that the House could vote next week on this proposal. According to Pacheco, the bill should be on the agenda of the plenary vote next Wednesday (4) or on 10 December. 

The text is part of the Senate's list of priority votes over the next three weeks, which will precede the parliamentary recess that begins on 23 December. Among the proposals listed by the leaders are the regulation of artificial intelligence (AI); and the main text regulating tax reform.

Also on the agenda is the package of expenditure containment measures presented by Finance Minister Fernando Haddad to Senate leaders. The fiscal adjustment measures are expected to be approved by the end of this year. Pacheco also assessed that the ‘critical’ scenario in relation to online sports betting had prompted advocacy that the Senate should pronounce on other gambling.

‘It's something that already came out of the House, it has the support of the government, the support of various segments. And the Senate has to decide whether to approve it or not. That is why several senators asked at the leaders‘ meeting that it be submitted to the plenary, among other things because it has already been considered by the CCJ,’ the senator said.

Tight result

The bill was approved by the CCJ by a narrow margin. There were 14 votes in favour and 12 against. The bill creates rules for the operation and mechanisms for the supervision and control of gambling.

It also establishes taxes on gambling houses and on prizes, as well as a series of rights for gamblers (see below).
The text was already approved by the House in 2022 and faced obstacles during its passage through the Senate.

Resistance from conservative parliamentarians and social movements led to a series of postponements in the debate on the text. Recent investigations into online sports betting have also led to the postponement of the bill.

If approved as is by the full Senate, the bill will be sent to President Luiz Inácio Lula da Silva (PT) for sanction - as there were no changes to the content of the text by the senators.
The proposal approved by the CCJ authorises the practice and exploitation in Brazil of:

• casino games
• bingo games
• video bingo games
• online games
• gambling
• horse betting

Ending a ban of almost 80 years

The text puts an end to a 1946 law that banned the operation of gambling throughout the country. It also repeals parts of the Criminal Offences Act, which established penalties for the practice.

For example, minimum amounts of share capital and proof of the lawful origin of funds will be required. Only companies based in Brazil will be allowed to operate games of chance, which will be permitted in previously authorised locations.

According to the bill, the Ministry of Finance will be in charge of defining the licensing, inspection and operating authorisation processes. The government will also be able to create a regulatory agency.

According to the proposal, only those over the age of 18 will be allowed to gamble. For example, gamblers who declare themselves to be gambling addicts (people diagnosed with a compulsion to gamble) or who are judicially disqualified will be banned from gambling.

The bill's rapporteur, Senator Irajá (PSD-TO), argued that gambling represents a ‘relevant economic activity’ in Brazil and should therefore be ‘subject to regulation by the state. The main benefit of the bill is that it allows an economic activity that is already practised even in contravention to pass under state control, mitigating any link between gambling and organised crime,’ he said.

According to him, the creation of gambling rules also ‘paves the way’ for gambling addiction to be tackled as a ‘real public health problem, with part of the revenue going to mitigate this negative externality’.

The main points of the bill to liberalise gambling will be:

• operation
• who can gamble
• taxation of gamblers
• taxation of bookmakers
• inspection
• criminal offences
• Operations

The text establishes that gambling may only be offered by companies registered, based and managed in Brazil. The offer will depend on the granting of a licence by the Ministry of Finance.

According to the rules set out in the bill, the company's statutes must establish that the main activity of the CNPJ will be the exploitation of these practices, but activities such as the trade of food and beverages and the organisation of artistic and cultural activities may be registered as secondary activities.

To be eligible for an operating licence, in addition to other requirements, the company must demonstrate the lawful origin of the funds and a minimum capital:

• for bingo: R$ 10 million
• for casinos: R$ 100 million
• for Jogo do Bicho: R$ 10 million

Licences shall follow criteria to be defined by the ministry and may be granted on a permanent or fixed-term basis. Operations may also be authorised in specific or pre-defined locations, so-called gaming zones. These authorisations shall be non-negotiable and non-transferable.

Gambling may only be offered in physical or virtual establishments licensed by the federal government.
According to the proposal, if the authorisation criteria are not regulated 12 months after the entry into force of the law, bingo and jogo do bicho games will be provisionally authorised.

Each type of game will have previously established operating criteria:

- Horse betting: will need, for example, prior accreditation from the Ministry of Agriculture for horse racing and apply for authorisation to operate betting from the Ministry of Finance within one year. If the betting shop also wants to offer bingo, it will also need to be accredited for this type of gambling.

- Casinos: they will be accredited by public auction and may only operate in integrated leisure complexes or on ships. The version approved by the Chamber of Deputies stipulated that casino sites should be ‘specifically built for this purpose’. In the CCJ, the text was changed to places ‘specifically intended for this purpose’. The rapporteur believes that the change will ‘ensure greater participation of the hotel sector’ in the supply of casinos.

- Bingos: The offer can only take place in permanent homes, so-called bingo halls. Operating licences will be valid for 25 years.

- Jogo do bicho: will also have a 25-year licence, which will only be granted to companies that can prove that they have sufficient resources to pay their obligations.

Betting records will have to be on a digital platform. In particular, it will not be necessary to identify bettors who receive prizes up to the income tax exemption limit.

Who can play

The draft law establishes that only persons of legal age may gamble. Minors will also not be able to access accredited addresses to offer the games, nor will they be able to have gaming machines installed abroad. According to the bill, players will have up to 90 days to claim their winnings.

The text approved by the CCJ establishes that the following persons will be prevented from betting in any of the modalities:
- legal persons;
- persons with a compulsion to gamble who request their inclusion in the National Register of Prohibited Persons (Renapro);
- persons judicially interdicted, at the request of relatives, for gambling addiction;
- persons considered to be insolvent, i.e. those with debts exceeding their assets
- persons linked to gambling companies
- public officials linked to gambling supervisory bodies.

The bill also provides for the creation of a national policy for the protection of gambling addicts, with the obligation for gambling houses to maintain a service for gambling addicts and mechanisms for the prevention of gambling addiction.
The text prohibits gambling companies from offering, granting or facilitating loans to gamblers and allows companies accredited by the Ministry of Finance to collect gambling debts.

Taxation of players

Players' winnings (the value of winnings minus betting expenses in a 24-hour period) will only be taxed if they total or exceed R$10,000.

Income tax will be levied at a rate of 20% on the winnings. The tax will be withheld directly by the bookmaker.

Taxation of bookmakers

Companies accredited to operate games of chance in Brazil will have to pay a quarterly inspection fee, with different amounts for each type of game offered:

• bingo and horse betting: R$20,000 per licensed establishment
• online gaming: R$300,000 per authorised virtual address
• casinos: R$600,000 per authorised establishment
• games of chance: R$20,000 per licence.

Businesses will also be charged the Contribution for Intervention in the Economic Domain (Cide). The tax will be levied on the gross revenue of bookmakers - the revenue from betting minus the prizes distributed. The Cide will be levied at a rate of 17%, payable quarterly. The amount collected from the tax will be used for various purposes, such as programmes to combat gambling addiction and funds to transfer resources from the Union to states and municipalities.

Supervision

The gambling liberalisation proposal establishes a set of rules for transparency and supervision of gambling.
All financial transactions of bookmakers will have to be registered in the Audit and Control System (SAC), which will be accessible in real time by the Ministry of Finance.

Accredited betting companies will also have to submit half-yearly balance sheets of their operations. At the end of each year, they will also have to undergo an audit.

The bill also stipulates that machines used for gambling can only be offered after the Ministry of Finance has granted a registration. The document, which will be valid for four years, will guarantee that the equipment has not been tampered with.

According to the approved text, bookmakers will have to create mechanisms to prevent the use of games for money laundering and terrorist financing. The tools will have to establish channels for reporting and communicating suspicions to the responsible bodies.

Businesses will not be allowed to maintain gaming machines that allow cash payouts. Nor may they receive funds or pay prizes through financial institutions not authorised by the Central Bank.

The text of the draft law also provides that the election and appointment of company administrators will have to be authorised by the Treasury. Among the criteria to be assessed will be:

• unimpeachable reputation; and
• absence of convictions for offences such as corruption and embezzlement.

Failure to comply with the rules could result in penalties for companies, such as

• fines of up to R$2 billion per violation
• partial or total suspension of activities for up to 180 days
• cancellation of the licence; and
• prohibition to obtain a new licence for up to ten years.

Criminal offences

In addition to administrative sanctions, the draft law also criminalises certain practices related to gambling.
According to the text, anyone operating gambling without a licence can be sentenced to four years' imprisonment. Betting fraud could also be punishable by up to seven years' imprisonment.

Authorising a minor to gamble will carry a prison sentence of up to two years, as well as a fine. There will also be a penalty for obstructing or hindering the inspection of gambling: imprisonment for up to three years, plus a fine.

By Kevin Lima