The Brazilian Ministry of Finance published rules and conditions for obtaining authorization for commercial exploitation of the lottery modality of fixed-odd betting (bets) in Brazil.
The Regulation N. 827, dated May 21, 2024, awaited by Brazilian and international sports betting groups, will allow the regularization of this business in the sports betting and online gaming segments.
For “bets” to obtain authorization from the Brazilian Ministry of Finance, they must meet criteria in 5 categories: legal qualification, tax and labor regularity, suitability, economic-financial qualification and technical qualification.
We describe below 6 important points of the Regulation 827 to be observed:
1. Legal Qualification of the Fixed Odd Bets Company: Legal qualification requires information about controlling shareholders, holders of qualified equity participation, administrators and final beneficiaries of the betting company.
It will be necessary to inform (i) the financial and payment institutions that will provide financial services to the betting company, and (ii) the internal organizational chart and organizational structure of the economic group to which it belongs.
2. Fiscal and Labor Regularity of the Fixed Odd Bets Company: It will be necessary to prove (i) fiscal regularity with the Brazilian National Treasury, (ii) regularity with the state treasury where the betting company is headquartered, (iii) regularity with the municipal treasury where it is headquartered, (iv) FGTS regularity, and (v) regularity of labor debts.
3. Suitability of the Bets Company: The applicant must present documents proving an unblemished reputation, corrective denial and denial of unreputable and disqualified bidders.
In the case of controlling shareholders and holders of qualified holdings, they must provide a declaration of unblemished reputation, a declaration of the lawful origin of the funds that make up the equity capital of the applicant betting company, in addition to other documents and declarations applicable to legal entities or individuals.
4. Economic-Financial Qualification of the Fixed Odd Bets Company: Among the main requirements are (i) proof of constitution of a financial reserve of at least BRL 5 million, (ii) proof of payment in current currency of the minimum share capital of BRL 30 million, and (iii) proof of minimum net worth of BRL 30 million. If the betting company requires additional authorizations, the above amounts will be required to be supplemented, through an act of authorization granted.
The regulation also requires the participation of Brazilian citizen or entity as partner holding at least 20% of the legal entity’s equity.
5. Technical Qualification of the Fixed Odd Betting Company: Technical qualification will be proven, among other requirements, through (i) technical certificate of the betting system, and (ii) declaration of adoption and implementation of policies, procedures and controls of (ii.1) prevention of money laundering, terrorist financing and the proliferation of weapons of mass destruction, (ii.2) responsible gambling and prevention of pathological gambling disorders, (ii.3) code of conduct and dissemination of good advertising and advertising practices, (ii.4) betting integrity and prevention of manipulation of results and other frauds, (ii.5) liquidity risk management, (ii.6) continuity of Information Technology, and (ii.7) corporate governance structure compatible with the complexity, specificity and risks of the business.
6. Deadlines to be Observed by Fixed Odd Betting Companies: Betting companies that submit the authorization request within the first 90 days of the publication of Regulation 827 will be guaranteed (i) the sending of the notification to make payment for the grant or rejection of the request authorization within 180 days of publication of the Regulation, and (ii) the granting of authorization until December 31, 2024, as long as the legal requirements are met.
From January 1, 2025, legal entities that are active in Brazil without due authorization for commercial exploitation of the fixed-odd lottery betting modality will be subject to the relevant penalties.
National and international betting groups must comply with the terms of the Ordinance with a view to regularizing the operation of this business in the sports betting and online gaming segments.
