The online gambling industry may soon have a new market to target legally. A gambling regulation bill passed a House committee vote last week and brought the legislation one step closer to becoming law in Brazil. SB 186/2014 seeks to legalize online gambling and set up a regulatory framework aimed at protecting consumers and collecting taxes.
SB 186/204 covers a wide range of topics. In addition to online sports betting and gambling, the bill would also approve the construction of up to 35 resort casinos. Every state would be allowed to build at least one casino, with no state permitted to construct more than three.
Online gambling would be overseen by the government although details are missing regarding what would be expected of licensed operators and whether or not foreign companies will be able to apply for an online gambling license without partnering with a local brick-and-mortar casino. Online poker is not mentioned in the bill, although lawmakers did consider legalizing online poker at one point in 2015.
Government officials estimate that the industry could provide up to 23 billion BRL ($6.3 billion) per year in new tax revenues. Given the current economic and political crises, the timing of this renewed push for legalization of online betting in Brazil is hardly surprising. Brazil’s economy has limped along the past several years with the market contracting by 3.8 percent last year. Some economists call it the worst recession in a hundred years.
Brazil’s already massive underground gambling market provides further justification for the bill. One estimate recently valued the illegal gambling market at 18 billion BRL. Much of that figure is accounted for by a numbers game called “game of animals” and online betting. Many of the world’s largest betting sites serve the Brazilian market current despite lacking any legal grounds to do so.
Brazilian lawmakers have been toying with the idea of legalizing, regulating and taxing online gambling since at least 2014. Senator Ciro Nogueira introduced a bill in 2014 that sought to legalize online gambling and tax it at a rate of 10%. At the time, he quoted studies that estimated annual tax revenues in the range of $6.8 billion.
Ciro Nogeuira later sponsored SB 186/2014, which has changed some since his initial proposal. In its current form, the bill would set a tax rate of 20% of gross revenues for online gambling companies and 10% on brick-and-mortar operations. The government’s reasoning is that online betting sites can absorb the higher tax rate due to them having lower startup and ongoing costs than physical establishments.
SBC News reports that all political parties mostly support the initiative. However, not everyone is on board. Last year, the president of the national prosecutors’ association told Correio Braziliense that he doubts legalization proposals could adequately prevent the criminal element from infiltrating the Brazilian gambling industry.
Several amendments have been added to the bill since it was first proposed and were approved in last week’s committee vote. Other details such as a list of regulations remain to be seen. President Dilma Rousseff’s party is reluctant to reveal the full extent of regulations, the number of licenses to be awarded and other details.