GLMS President, Ludovico Calvi, explains the process of drafting a new betting regulation which is taking place in Brazil, where Italy and Europe, as mature markets, could play a central role when it comes to regulatory frameworks.
Brazil is not only the promised land of betting for international operators who have been watching – for a long time – with great interest to the launch of a new sport betting regulation in the most important South American country, but it could also turn out to be a very innovative regulatory platform. The novelty is the proposed level of market sustainability, that could lead to the creation of an “ideal” market environment from the point of view of control, safety and profitability of the entire value chain, even if at times it is necessary to strike a compromise between political and private interests. Ludovico Calvi, President of the Global Lottery Monitoring System, explains to GiocoNews.it what is happening in Brazil, he has been personally following the regulatory developments in the country, which could also be of great interest to European and Italian operators, who could also play a direct role in the regulatory process.
“In recent years, as GLMS, we have been closely supporting the Brazilian government, which has been assessing the gaming regulations in many jurisdictions and evaluating the best practices. This is one of the activities which our organization has been carrying out since its establishment, offering competent support to regulators and legislators in various countries for the development of newly regulated and sustainable betting markets. In this path, we have illustrated the various best practices that can be identified in different European markets and just in recent days we have come to the definition of a draft law which has been taken as reference by the Brazilian government and the Ministry of Finance. Following the conclusion of our activities, about ten days ago, a draft decree was produced based on these indications that have just been published on the official website of the Brazilian Ministry of Finance – in the so-called “Diary of the Union”, similar to our Italian Official Gazette – with the Brazilian government launching a public consultation to collect all useful comments and indications from all stakeholders. This stage will be very useful in the parliamentary process which will follow this step to see the implementation of the decree.
The invitation from the Ministry is to involve all public and private stakeholders to express their opinions about the content of the decree and there are no limits to this, because everyone can participate, the deadline is September 27th .
THE KEY PILLARS OF THE BRAZILIAN LAW – A key element of the Brazilian model is the adoption of an authorization model – therefore not a concession one – where, however, the duration is set at nine years, allowing in this way operators to amortize the costs of start-up and operations. The cost of the authorization is Brl 3 million, about €670 thousand, to which is added an inspection fee for police and finance services to the public and responsible gaming. The fee is applied differently depending on the distribution channel. About €6,660 per month for the retail channel, while around €8,900 for the digital channel. If the operator uses both distribution channels the fee is around €11 thousand per month. In addition to that, operators are also required to issue a bank guarantee of approximately Brl6 million, or about €1 million and 330 thousand, which must be presented as a guarantee for the payment of winnings at the time of acquiring an authorisation.
When it comes to the fiscal environment, 99 percent of what is collected by the operators in betting services is left to the market, while 1 percent of the turnover is paid in tax to the Federal State. This means that based on the payout level recorded by in the betting industry – which may change for example between 85 or 95 percent – the equivalent tax on revenue for the operators may change between 10 or 12, 15 or 18 percent. It is clear that there are regional betting behaviour dynamics for which tax values will change according for example to multiple vs single betting and related distribution channels. The framework is surely comprehensive and it also includes specific articles dedicated to responsible gaming and the fight against match-fixing and here GLMS has provided effective support with all its experience in over 30 regulated betting markets worldwide. GLMS contribution was also aimed at creating a regulated, responsible and sustainable betting market environment since the lack of sustainable market conditions have often favoured the proliferation of black market, criminal orgs and therefore match fixing. There are provisions in the law to sanction media and sports clubs if they sign commercial agreements with unauthorized betting operators.
The decree doesn’t specifically define the type of bets which can be offered by the operators and for this the regulator relies on the experience and competence of the authorised betting operators.
However, the law and the implementing decree define very strict provisions on the activity of control and repression of illegality with the regulator playing a centric role, certifications of all betting systems and validation of every single bet. It is a complex model and it will have to be consolidated over time, however the direction is certainly the right one: with a very farsighted regulatory model that takes into account all the best practices adopted in the world by gaming regulators. Here the Brazilian government took all precautions to stay away from risks of illegality or, in any case, of irregularities which can occur in such a complex market and in newly regulated environments.
All this is defined in the main law, while in the implementing decree there are a whole series of further technical and operational articles, which will be clearly subject to further evaluation following the result of the public consultation. For this reason, my invitation is to take this great opportunity given by the Brazilian Ministry of Finance to operators, to provide feedback to the regulator by participating in the public consultation, from anywhere in the world. This is also why the regulator will accept comments to the implementing decree in English. The purpose is precisely to receive valuable opinions and without doubt contributions also from other regulators and legislators which will allow the Brazilian government and the Ministry to define a sustainable and innovative betting regulatory framework.
THE CHALLENGE OF THE REGULATOR – The question that everyone is asking in this very moment, is : how many grey and black market operators will choose to leave the widespread illegality to move to the a Federal betting authorised system ? “It is clear that with this value chain distributing 99 percent of what is collected back to the market, it is expected that a large number of operators may decide to join the newly regulated market and to emerge from the dark. I personally believe that more than 100 operators will acquire a state authorization for the next nine years. Of course, if the key milestones should change at the end of the public consultation, the type of appeal for the operators could consequently change as well. This has to be taken into account. However, I am very confident that the parliamentary process to approve the law can lead to a final implementation, even if some changes may be needed and therefore a second rewriting phase before its release may be necessary. It is clear that in Brazil, as in the rest of the world, there is an intense internal debate over how to regulate sport betting but also for this reason the government has decided to implement very strict rules to give certainties to the public and safeguard consumers. Among other things, the law provides very strict provisions for the repression of illegality, even prison sentences up to five years for those who offer illegal betting and not just the adoption of a black list of unauthorised operators”.
We are talking about a country with a population of over 218 million inhabitants, with a deeply rooted passion for football, which involves every social class, without considering other sports which are also popular. The role the world of football will decide to play will therefore be crucial, it will undoubtedly have a strong influence on the millions of supporters and a National Football Federation holding five world titles. The possibility of placing a sector like the gaming within the entertainment and sports industry, thanks to an innovative and solid regulatory framework, can bring widespread benefits and realize the full value potential for the entire country.
TIMING – The government at the time of the signing of the main law by former president Temer, at the end of December 2018, had given itself two years to launch Sport betting. I believe that by the end of this year or the beginning of 2020, we will be in a position of having a regulatory framework, which, if it also finds the support of the congress, can be approved, starting the process of implementation of the decree. In the meantime the regulator could start training new competent resources to satisfy regulatory needs from the to-be authorised betting operators.