Brazil is a highly attractive and untapped gaming market

  • Better known as the sleeping giant of the gaming world, Brazil has a population of over 213 million people, making it the 6th largest country globally
  • We estimate casinos could generate between $10B to $20B of GGR under the current proposed legislation, which means Brazil would generate more GGR than every jurisdiction except the US and Macau
  • Due to stalled efforts of gaming expansion in Japan, Brazil may be the most fertile ground for large scale gaming developers, investors, and operators
  • After more than five decades of gaming prohibition, increasing momentum around the need for expanded regulatory framework has never been stronger in the National Congress

UPDATE – 5/9/2022

  • Brazil published draft regulations for sports betting: the text does not limit the number of operators in the national territory and establishes an authorization fee of R$ 22.2 million (US$ 4.5m) valid for five years (see below for more detail)
  • The regulations will come into force 90 days after being signed into law by President Jair Bolsonaro, an event that is set to occur on May 10
  • The Chamber of Deputies approved Gaming Bill No. 442/91, which legalizes casinos, bingos, jogo de bicho and online gaming
  • The Senate will consider the Bill next; our channel checks suggest there is a reasonable chance for enactment by year-end, followed by a long regulatory review to establish rules and regulations
  • Bill 442/91 authorizes an overwhelming amount of gaming – it will be incumbent upon regulators to develop a sensible plan for orderly roll-out
  • The Tourism Ministry is a key driver of the legalization process, which provides support for integrated resort casinos in large states (Sao Paolo, Rio de Janeiro etc…)
  • Separately, the Brazilian Supreme Court (STF), will decide whether or not Article 50, the general law that states gaming is illegal in public venues, is unconstitutional. The debate over this law comes into play because grey market operators target Brazil customers. An STF decision that deems Article 50 unconstitutional, will instantly legitimize the online gaming market and ultimately all gambling would be considered legal (even without regulation). The case was postponed from its intial April 7th date – a new date is TBD
  • Currently the only legal forms of authorized gambling in Brazil are state-run lotteries and horse race betting at authorized racetracks. Sports betting is legal pending approved regulations

Bill 442/91 (Chamber of Deputies Bill) legalizes the following:

  • Regulates all types of gaming in Brazil including casinos, bingo, sports betting, jogo de bicho, slot machines and horse racing
  • Casino licenses will be awarded through a technical tender and awarded to the highest bid subject to minimum of R$100 million. Casino license fee is R$600,000 per establishment.
  • Bill allows establishment of casinos as part of integrated resorts in each of Brazil’s 26 states. São Paulo could have up to 3 casinos, Rio de Janeiro, Minas Gerais and Bahia could have up to 2 casinos each and other Brazilian states could have 1 casino each.
  • No operator may be granted two licenses in the same state, or more than five overall.
  • Licensed entities must be incorporated under Brazilian law, with headquarters and management in the country; technically capable of conducting the activity; and financially and economically credible.
  • The Executive Power may grant the exploitation of casino games on river or sea vessels in the national territory for up to 10 (ten) establishments.
  • Jogo de Bicho licenses will be awarded via a bidding process with a minimum bid of R$10 million. Jogo de Bicho license is R$20,000; fee will be paid quarterly, in reais (local currency).
  • Bingos are limited to 1 venue for every 150,000 inhabitants per municipality. Bingos are limited to 400 video bingo machines per establishment; operations are authorized in stadiums with a capacity of over 15,000 seats
  • Online gaming would be permitted, with both the federal government and states permitted to offer licenses. Gaming tax rate is set at 15%. Unlicensed foreign websites would be blocked, and servers for locally licensed igaming operators must be in Brazil.
  • Establishes the creation of SINAJ – National Gaming System, comprising a federal regulatory and supervisory body, operating entities, betting agents, turf entities and accounting and operational authorship companies
  • Establishes the creation of a “National Policy for the Protection of Players and Bettors” as well as the implementation of the National Register of Players and Bettors and criteria for the prevention of money laundering
  • Establishes the CIDE-Games Contribution for Intervention in the Economic Domain, 25% GGR tax for online gaming, 20% on land-based gaming; these amounts will be divided between the Union, States and Municipalities, as well as SINAJ

Sports Betting regulations are expected to be issued in May ahead of Qatar World Cup in November 2022

  • Draft regulations include the following guidelines:
    • No limit on number of licenses and licenses are valid for 5 years
    • One-time fee of R$22.2M/$4.4M US
    • To qualify for a license the operator must establish a local subsidiary in Brazil
    • Sufficient financial capacity determined by the relationship between its share capital and the volume of bets it takes, rather than setting a specific minimum amount of capital.
    • Licensees must have international certification of its systems and contract in place with an international integrity monitoring body
    • Ministry will provide for an experimental “sandbox” regulatory regime, allowing certain operators to launch early before the full system is established; will provide details such as the criteria for selecting operators within the next 120 days
    • The Ministry of the Economy will act as the regulator and will establish a deadline – which will fall within the next six months – for operators already doing business in Brazil to comply with these rules.
    • There will be a gaming tax on GGR (TBD)

Supreme Court ended the federal monopoly on lottery paving the way for all states to run an independent lottery – many states are running an RFP process

  • Lottery operators and suppliers (incumbents and new entrants) are now able to offer their platforms and services directly to the States
  • Some states, initiated market studies and business plans to implement lottery operations including: Sao Paulo, the Federal District, Maranhao, Parana, Tocantins and Amazonas
  • States are issuing RFP’s and we expect industry leaders such as IGT, Sci Games and Intralot, as well as local companies to respond
  • State run lottery operations could commence in 2022

Spectrum Gaming Capital released a report on Attracting Investment to a New Brazil Gaming Industry

Please click to access the reports in both English and Portuguese versions