Brazil’s government has released new regulations under Normative Ordinance No 1,475, that will ban operators that have not yet applied for a betting licence, as of 1 October.

Operators that have submitted an application but aren’t yet active in the market will have to wait until 1 January to operate, provided they are granted a licence. And those that have already submitted an application can continue to operate until the end of December, ahead of the 1 January legal market launch date.

A total of 113 betting applications were submitted during the regulator’s initial 90-day window of preference. Operators that applied within that timespan are guaranteed to be granted a licence by 1 January. The Secretariat of Prizes and Bets (SPA), which sits within the Ministry of Finance, is currently analysing the requests.

Operators that do not have a licence will face heavy sanctions from January, including a BRL2bn (£269.8m/€320.3m/$354m) fine and a ban on applying for a licence for up to 10 years.

Eduardo Carvalhaes and Karen Coutinho, lawyers for Brazilian law firm Lefosse, believe this will be a useful way of alleviating the fears of those companies seeking authorisation over the lingering presence of illegal operators.

“The market expectation is that this measure will bring forward the removal of non-compliant companies from 1 January 2025 to October,” Carvalhaes and Coutinho told iGB.

How will the suspension work?
Currently active operators must apply for a betting licence by 11:59pm on 30 September to avoid being blocked from the market. This will include telling the SPA which brands and domains they plan to operate during the “adaptation period” between 1 October and 31 December.

Banned operators must give players a 10-day window to withdraw funds.

All legal operators must use the Bet.br domain as from 1 October to make them easier to distinguish from illegal sites. The domain change will enable the SPA to easily detect illegal operators.

In Lefosse’s view, there will be “minimal” impact for operators who have already demonstrated their intent to comply with the regulations. For those that haven’t, there will be bigger ramifications.

“Companies operating outside the legal framework will need to quickly suspend their activities during this period and decide whether to comply (and request authorisation) or exit the Brazilian market,” they explain.

“From now on, companies aiming to regularise their operations must promptly express their intent, suspend their activities during this period or may face penalties starting in October.”

SPA confident October deadline will restrict black market
On the rule change, SPA head Regis Dudena said the move is necessary to crackdown on illegal operators. “[As] many police operations involving companies in the betting market in a criminal manner have come to light. This was the way we found to not wait until January to start separating the wheat from the chaff,” he said.

The treasury will work alongside other bodies such as the Ministry of Justice and Public Security, the Central Bank of Brazil and the National Telecommunications Agency Anatel to ensure unlicensed sites will be taken offline from 11 October.

Dudena believes the move aligns with the SPA’s objective to “protect the mental, financial and physical health” of players from illegal operators wanting to use betting as a way of committing fraud and money laundering.

Crack down on illegal operators
In its black market crackdown, the Brazilian government will block payments involving offshore companies made through Pix, an instant payment service controlled by the Central Bank and that’s used by the majority of the betting market.

Pay4Fun director Ari Celia believes the payment blocking will prove effective in stamping out the black market due to the government’s control of Pix.

“If any commercial bank isn’t aware they have a company or client that is using illegal sites, as soon as they receive a warning from the Central Bank they will shut down their bank account immediately,” Celia told iGB.

“If they don’t, they’ll be subject to fines. There’s no point for any commercial bank in Brazil to allow those accounts to process Pix once they are notified.”

Additionally, the government will partner with social media platforms, as well as the Central Bank, to aid the fight against black market operators.

Folha reported talks are ongoing between the government and sites such as Google and Meta to block illegal operators. The government also plans to work alongside internet service providers to identify and remove the addresses of offshore sites.

Has pressure forced the Brazilian government to take action?
Dudena alluded to recent police operations involving companies allegedly engaged in illegal betting. This includes a particularly high profile case involving local operator Esportes da Sorte.

The company’s founder Darwin Henrique da Silva Filho and his wife were arrested on 5 September as part of the federal police’s ‘Operation Integration’. This is investigating allegations of money laundering and illegal betting involving Esportes da Sorte.

Following the arrests, the Ministry of Justice claimed it was targeting a criminal organisation that has moved nearly BRL3bn in illegal gambling and money laundering.

Additionally, the betting sector has come under fire from the retail sector over claims gamblers in Brazil are spending less on purchases such as clothes and food in order to fund their betting habits.

 A controversial study by the Brazilian Society of Retail and Consumption (SBVC) claims 23% of those committing part of their salary to gambling each month had stopped buying clothes, while 11% reduced their spend on healthcare and medication.

Coutinho and Carvalhaes believe the October deadline can help ease fears over the impact of gambling on consumer behaviour and illegal operators.

“The suspension of betting companies that have not requested authorisation to operate serves as a way to expedite the screening of compliant and non-compliant companies, initially scheduled for January 2025.

“It also aims to establish greater control over the operation of sports betting in Brazil and the services offered to bettors, with the purpose of protecting their mental, financial, and physical well-being.”