What’s behind the slow uptake in Brazil online betting licences?

The opening of the licensing window marked a crucial milestone in the hotly anticipated legalisation of betting in Brazil, which is expected to become a $9bn (£7bn/€8.3bn) market by 2028, H2 Gambling Capital has estimated.

Fellipe Fraga, chief business officer at local operator EstrelaBet, predicts operators may be waiting for the final regulations to drop in July before formally applying for a licence.

“There are still important topics that need to be discussed in the process of obtaining the licence,” he says.

“The remaining ordinances will contribute to the definition of the strategies that companies will adopt in the regulatory process.”

Fraga says EstrelaBet is seeking further explanation from the ministry of finance’s secretariat of prizes and bets (SPA) on how to achieve a safe and responsible betting market before it submits its application.

“It is still necessary to wait for important confirmations from the regulator, especially regarding the understanding of some points and concepts that will allow greater clarity as to the necessary steps and intended advances so that Brazilians can have fun with the games, always responsibly,” Fraga explains.

The companies that apply within the 90-day initial window, which shuts on 20 August, will be placed at the front of the queue for assessment and ensured that their application is processed by 1 January 2025. After that, punitive action will be taken against active operators that are yet to gain a licence.

Kaizen’s first mover advantage in Brazil

At the time of writing, Greek operator Kaizen Gaming was the only operator to have submitted its application.

Hugo Baungartner, CCO of Aposta Ganha, notes Kaizen’s leading position in the country’s grey market. “They wanted to be the first,” he says. “I know because they’ve preparing everything since forever.”

Kaizen signed on as a sponsor for the Copa America football tournament this summer via its Betano brand, to boost its growing presence in LatAm. It also sealed a sponsorship deal with the top football league in Argentina, in May.

Uncertainty and compliance delaying the process

Overall, Baungartner anticipates between 20 and 25 operators will apply for licences before the August closing date, believing the 90-day period given by the SPA is enough time for companies to get their affairs in order.

“The homework is doable and operators still have time to show certification, so I think 90 days is enough time,” he says.

“[Although some operators] want to make sure all the ordinances are published by the government before the final date for applications.”

He says the remaining 43 days of the window for priority should be long enough for operators.

But, on the World Series of Politics podcast, Baungartner said some of the smaller operators would not be able to afford the BRL30m (£4.3m/€5.1m/$5.9m) licensing fee, noting that the grey market would always be present in the country.

“Some of them don’t have the $5.9m to apply and they are comfortable as they are. I think the grey market will always be there,” he says.  

Many industry commentators have expressed concern that the application process requires extensive input that could delay operators beyond the 90-day window.  

Fabio Ferreira Kujawski, lawyer and partner at Mattos Filho, believes the 90 days is insufficient considering “the series of bureaucratic obstacles” operators face.

There is also some general confusion around exactly what the specifications for applying for a betting licence are. 

“In my opinion, the understanding should be changed so that companies that have not formally requested their authorisations by 31 December 2025 should be considered irregular (illegal).”

Hurdles to overcome

These “bureaucratic obstacles” for applicants include a local headquarters, a local subsidiary with a Brazilian national holding a minimum of 20% of the share capital (for international firms), and a financial reserve of at least BRL5m ($915,719) beyond the licence fee.

The ordinance on licensing also outlined an extensive series of technical and security requirements.

Baungartner points to the upcoming publication of the online gaming ordinance in stage three of the regulatory rollout as a key tipping point for licence applications, as it will provide clarity around which online games can be legally offered.

He also believes the extensive compliance required by the regulator is warranted as it “wants to do things right”.

“They’re making sure labs that are approved for the Brazilian market know exactly how to certify the games included in the ordinance,” Baungartner declares.

Fraga expresses sympathy for the regulator and the complexities around introducing a legal betting framework, but he also feels further delays could prove detrimental to a responsible industry.

“It is possible to understand the regulator in this process,” Fraga continues. “However, any day less [until regulation] harms the country itself, leaving it further away from obtaining the resources from the taxes and also having the rules defined for the market to start fighting practices contrary to what is expected of good behaviour.”

The requirements

To acquire a licence, operators must satisfy a number of requirements outlined in the published ordinances. These include;

• BRL30m licence fee must be paid. Licences last five years and allow for three skins
• Must be headquartered on Brazilian soil
• Foreign companies must have local subsidiary with a Brazilian owning a minimum of 20% of share capital
• Must have documentation proving its legal right to operate in Brazil
• Must submit compliance declaration for payments regulation with certification from the Central Bank of Brazil
• Joint certificate from the Special Secretariat of Federal Revenue and the Attorney General’s Office of the National Treasury for tax purposes
• All core personnel and beneficiaries must have clean criminal record
• Projected cash flow for next two financial years, signed by finance director or equivalent

Start of 2025 the target for launch

The regulator is confident legal online gambling will go live in Brazil on 1 January 2025, when punitive measures for unlicensed operators will come into force.

Udo Seckelmann, head of gambling & crypto at Bichara e Motta Advogados, said he expects up to 60 operators to apply in the first wave.

“Some of them because of fear of missing out on that first wave,” he says.

“You have to apply and see what’s going to happen because Brazil is the flavour of the month and some of [the operators] are not very certain but they say ok, let’s start this process, see what’s going to happen and eventually if it doesn’t make sense and then we’re not profitable, then we can leave at any time.”

Seckelmann expects mostly foreign operators will make up the majority of the first wave of applicants, followed by local operators in the second. He says overall, up to 70% of betting licence applicants will likely be companies foreign to Brazil.

Confidence remains in Brazil 

While Kujawski, Fraga and Baungartner all pointed to the ongoing regulation rollout as a key reason for the lack of applications, confidence remains in Brazil that an increase in licence requests should be imminent. 

In January, the ministry of finance revealed 134 local and international operators had indicated their interest in a licence by signing pre-market ordinance measures.

Baungartner says Aposta Ganha will apply in the first week of August. EstrelaBet, meanwhile, will apply “when the time is right for the company” according to Fraga.

So, while the scramble for licences hasn’t yet materialised, it does seem the industry is expecting applications to flood in once regulation is fully established, after a long and often drawn-out journey to legalisation.