Do you feel that the last ordinance addressing the involvement of the Ministry of Sports in the federal licensing process has managed to shed some more light on the process for operators?
Not really. I believe it has just added another intermediate authority, with a mandate to approve or deny operators in the application processes, without really adding anything relevant for the process. It seems that what we need is a strong gaming authority, one that holds jurisdiction over the operators and can act as the one in power to oversee everything – from the licensing process, to regulating and sanctioning the entities. I think the good thing about an independent regulatory agency is that it applies the regulation without suffering a lot of interference from the executive branch, which I think should be the same for the gaming sector. I wasn’t happy about the last ordinance. I think that it adds unnecessary complexity to the process. It will probably cause some delays in the process as well, because now the Minister of Finance could, theoretically, approve a certain application the Minister of Sports then rejects. Despite all of this, in the end it's the attorney’s office of the federal government that will ultimately decide if the application should be approved or not. This latest ordinance creates room for a potential conflict between authorities in the licensing process.
Do you expect the complex issue of the alternative provincial licenses available in areas like Rio de Janeiro will be resolved before the remaining ordinances are released, if at all?
The licensing process is already ambiguous and complex, especially when you consider the problems presented by the alternative provincial license as an option for operators in places like Rio de Janeiro. I don’t think that the remaining ordinances will address this issue. However, something interesting is that the 14 790 betting law has determined that an operator or its conglomerate economic group can only have one federal or state license. Essentially, you cannot have multiple state licenses. Theoretically, what you could do is create independent state operators. The problem with this is ultimately you consolidate the wealthiest regions of Brazil – probably in the Southeast. Overall, I don’t believe the ordinances that are pending will tackle any of those matters. I think this is still something that will probably need more adjustment further down the line.
Something I can tell you for sure is that no operator could afford not to have PIX in their systems
One of the key reasons named for the regulation of the Brazilian market is to tackle the black market. What effect do you think these delays will have for black-market operators?
January 1 2025 is a key date. In my opinion, all the operators that haven’t received a license by this time should be deemed as actually operating unlawfully in Brazil. I already criticized the roadmap to regulation because, honestly, I don’t think there was enough time for companies to incorporate in Brazil while complying with all the requirements; especially without knowing the terms and conditions that we’re still waiting to be detailed in the ordinances that have not come out yet. How can you expect the companies to create policies around anti-money laundering or responsible gaming if you don’t know what the rules are? The original date for a fully regulated market was August 20, but I think they will need more time. What happens then is that with respect to the black market, unless the Ministry of Finance postpones that date – which I think it should do – but if it doesn’t it will have to start its enforcement against the unlicensed operators. Because of this I think there could be a potential delay on that compliance deadline date. If that doesn’t happen, the operators will have to start working on their internal policies to comply with the upcoming requirements.
For those who don’t apply for a license, they will have to be banned from operating offshore because there will be other licensed entities, paying taxes, paying the license fee – which was not cheap – competing with those that haven’t contributed anything. The Ministry of Finance has an obligation in this area. Honestly, if you ask me, do I think that anything detailed in the upcoming ordinances is going to put companies off the idea of applying for a license? I suspect the answer would be no. The Brazilian market is huge. Whoever actually wants to be in Brazil... will be.
This latest ordinance creates room for a potential conflict between authorities in the licensing process
We are still waiting for the ordinances relating to responsible gambling practices – do you think the high licensing fees and particularly the ban on promotional bets are clear indicators that regulation could be strict in this area?
Yes. We have very strict consumer protection law in Brazil, already. In terms of the restrictions for the promotional bets, it seems the whole objective behind that was to prevent players from getting into debt. The same reason why credit cards are not allowed for processing. Both of those things have quite big implications for operators who, of course, use free bets to acquire new players. However, because of the way the regulation was written, it may eventually allow companies to offer promotional bets to existing customers, but not for new customers. Although, this is just an interpretation. Overall, I think the responsible gaming regulation will be strict in Brazil. I just hope that it is not totally disaligned with international practises.
A regulated market was predicted for July, but halfway through June we are still several ordinances down – what do you think will happen next?
The regulator has been saying that, by August 20, all the ordinances will have to be published. Of course, this is not an ideal deadline because, from the operator’s side, they must make the filing ahead of time to ensure they secure the license by the end of the year, which is a pretty quick turnaround for Brazil. As I said, I think they could potentially get a few things wrong in the upcoming regulations, and I think it’s going to be difficult for operators to influence amendments within new regulations. As we know, there are multiple Brazilian authorities currently reviewing the regulations, which is probably why we have so many delays.
That’s why I keep saying that the sooner we have an independent gaming authority in Brazil, the better: for the operators, for the consumers and for the sector as a whole. There has also been speculation that only one operator has applied for a federal license. I don’t know how true it is, but it’s not a cause for concern in my opinion. People may wonder what is happening, why is there such little movement and so many delays. Well, as a Brazilian myself, I can confirm that it’s very typical for Brazilians to wait until the last day to get things done. Another less cultural explanation is that incorporating in Brazil takes a lot of time. For example, in the US, you can do it very quickly. It’s not the same here. Foreign operators might just be going through the bureaucracy.
Can you explain whether you think foreign operators will have to implement major changes to their internal payment infrastructure to adapt to PIX payments when they enter Brazil?
PIX is a payment system that was designed and is operated by the Brazilian Central Bank. It allows instant payments using certain keys. You don’t need to know the bank account to which you’re transferring. You don’t need to type the numbers. You don’t need to type the name of the recipient of that transfer. You just select a certain key which could be, for example, an individual’s Tax ID number, your cell phone number, email address and so on.
It’s very easy. You have QR codes that are embedded into PIX, and you just open your camera and read the QR code. You already have all the information, and you just enter the amount you want to send. Transactions can be done very quickly, with no bureaucracy and the recipient gets the fund immediately. It has, over the last four years, become the most used payment system in Brazil. Something I can tell you for sure is that no operator could afford not to have PIX in their systems. There is no way around it. There are many payment institutions in Brazil that are licensed by the central bank and that the operators could partner with. I think it’s a very simple straightforward contractual arrangement and an easy technological set-up. Ultimately you are just buying a solution for payment. You simply plug that solution into the website and you’re good to go. In terms of a challenge, making sure the APIs and the connections between the payment institution and the website is done properly could be one; but other than that I don’t believe PIX is going to be a big hurdle for the operators.
