The Ministry of Finance’s Secretariat of Prizes and Betting (“Gaming Authority”) has regulated the authorization proceeding for commercial exploitation of the lottery modality of fixed-odds betting (“Authorization”), especially the well-known sports betting, by private economic agents throughout the Brazilian territory. Regulation came by Ordinance No. 827, published on May 22, 2024 (“Ordinance”).
Check out some of the main rules and learn more about the legal entities that may obtain the Authorization.
Who may participate in the capital of the Brazilian legal entity that requests the Authorization?
The Gamming Authority clarifies that Brazilian legal entities eligible for the Authorization must have at least 20% of the share capital held by Brazilian individuals or Brazilian legal entities (that is, incorporated under Brazilian law and headquartered and managed in the country). Thus, legal entities wholly owned by foreign shareholders will not be eligible for the Authorization.
In what form may the legal entity be incorporated, and who are the statutory officers?
The legal entity applying for the Authorization, to be incorporated as a limited liability company (sociedade limitada) or corporation (sociedade anônima), must have statutory officers – all domiciled in Brazil – who will be responsible for “accounting and finances”, “integrity and compliance”, “service to bettors and ombudsman” and “relationship with the Ministry of Finance” areas.
Should the legal entity have a specific corporate purpose and National Code of Economic Activity (“CNAE”)?
Yes, the main corporate purpose must contain “exploration of fixed-odds betting “, and include in its activities CNAE 9200-3/99, by means of a corporate act to be filed before the corresponding commercial board of trade, with due registration update before the Brazilian corporate taxpayer identification.
What are the application criteria for the Authorization?
The legal entity that wishes to obtain the Authorization must apply electronically, via the SIGAP system, provided by the Gaming Authority.
The application must be accompanied by the documents indicated by the Ordinance, to prove, in relation to the applying legal entity:
- Legal qualification;
- Tax and Labor compliance;
- Suitability;
- Economic and financial qualification; and
- Technical qualification.
What are the deadlines for requesting Authorization and response by the PBO?
Legal entities that already operates the sports betting business in Brazil must obtain the Authorization by December 31, 2024.
As of January 1, 2025, those who exploit the activity of sports betting in an unauthorized manner will suffer the penalties provided for by Law No. 14,790, of 2023 (Sports Betting Law).
As for the deadline for analysis by Gaming Authority, there are two possibilities:
- general regime: the Gaming Authority notifies the applicant within 150 days from the date of submission of the Authorization application; or
- transitional regime: The Gaming Authority notifies the applicant within 180 days from the date of publication of the Ordinance, that is, until November 18, 2024.
Who is entitle to the transitional regime?
The transitional regime is applicable only to legal entities that submit their application for Authorization within the first 90 days as of the publication of the Ordinance – until August 20, 2024.
Legal entities that meet this deadline will have their Authorization published by December 31, 2024, once all the requirements contained in the Ordinance and the Sports Betting Law are met.
How long is the Authorization valid for, and what are the required fees and investments?
The Authorization will be granted for a period of 5 years, upon payment of a BRL 30 million fee, within 30 days from the notification of the applicant by Gamming Authority, considering the limit of up to 3 brands (trademarks) to be exploited by the applicant legal entity per Authorization.
Within the same period, the economic and financial qualification of the legal entity must be proven, by means of:
- constitution of a financial reserve, in the amount of BRL 5 million;
- proof of payment of a minimum share capital in the amount of BRL 30 million; and
- a minimum net equity of BRL 30 million.
The legal entity may apply for additional Authorizations, in other to operate more than 3 brands (trademarks) of sports betting houses. For each new Authorization, the following will be required:
- a new payment of BRL 30 million free and the constitution of an additional financial reserve of BRL 5 million, and
- proof of additional payment of share capital in the amount of BRL 15 Million, with the maintenance of its net equity at the same or higher level of its share capital.