The increase in online betting has made the iGaming segment gain an importance never seen before. This year alone, it is estimated that sports betting will generate around BRL 12 billion – but the challenge at the moment is the regulation of the sector in general.
ConJur recently published an article that reports on the normative and jurisprudential evolution of Gambling issues in Brazil, detailing how this market is important for the country.
A bomb that still seems to haunt some: in Brazil, games of chance or fortune — a name chosen by the customer — are not illegal; lato sensu. In fact, they are either monopolized by the State (lotteries) or authorized by the latter (turf bets) or are in the final stages of regulation (fixed bets).
The aforementioned petardo loses its potency and capacity for astonishment as we compile the specific legislation and analyze the jurisprudence of the Federal Supreme Court. There are old and more recent normative predictions on the Gambling Tupiniquim timeline.
Speaking of time, it must be said that he was implacable with the only Brazilian rule that restricts games, Decree-Law nº 9215/46[1], in the sense of making it anachronistic and on a collision course with the evidence of that the best way to control the activity is to keep it clandestine and, in addition, to enable a considerable increase in the State’s tax collection web, which loses around R$ 20 billion a year.[2]
Not by chance, the posture of regulating the gaming and betting market is a strong and growing trend in a number of developed countries. In the G20, for example, only three countries prohibit or restrict the practice: Brazil, Saudi Arabia and Indonesia.
Still, there are extremely relevant historical and sociological components, which lead a significant portion of the population to prefer activities with a ludic-random aspect.
In the domestic environment, these preferences are fully known by the State, which successfully exploits them through various types of lotteries, in the form of a monopoly.
There are currently ten different types of games managed by Caixa Econômica Federal: Milionária; Mega Sena; Quina; Lotomania; Lotofácil; lottery; Timemania; Dupla Sena; Lucky Day and Super Seven. Together, they set records in 2021 and the sales volume of games was the highest in history: BRL 18.5 billion in all game modalities, 8.2% higher than the previous record of BRL 17.1 billion in 2020[3]
Lotteries, in continuous operation in RJ; MG, CE and PB tend to proliferate to the other federated entities, given the understanding of the possibility of their exploitation in decisions handed down by the STF[4], from 2020.
Betting on horse races in authorized places is provided for in Law nº 7291/84, and is the first exception to the State monopoly, as its exploitation can occur through authorization granted to tourism entities.
Fixed odds sports betting was legalized in 2018, with the enactment of Law No. 13,756/2018, which is still awaiting the publication of its Regulatory Decree.
That said, an attempt will be made to present an overview of the most relevant issues of each of these gambling and betting modalities, in addition to some nuances about them and their operations, without intending to exhaust the matter.
As for turf, the word of English origin designated the first Thoroughbred horse races, around the 17th century. In Brazil, the sport arrived in the 19th century, almost always taxed as an elite sport.
Turfistic entities operate in Brazil, with regulation through a concession from the Ministry of Agriculture, Livestock and Supply, by means of a Patent Letter. Article 17 of Decree No. 96,993/88 defined betting on turf competitions, as all types of cash games carried out on horse racing, sponsored by legally authorized entities, including contests, lottery games, shots or betting auctions.
Perhaps because it is a sport with little popular appeal, effective discussions were not identified in the sense of seeking its modernization, which is why, in the legislation, the rules scrutinized when it was born in our country remain in force.
The judicial discussion that deserves attention began with a tax foreclosure perpetrated by the municipality of Rio de Janeiro, to the detriment of the Jockey Club Brasileiro, for the collection of approximately R$ 130 million, as ISS (Tax on Services). The municipality intended to receive the tax credit comprising, in its calculation basis, all income earned from betting (turnover).
The rapporteur of Extraordinary Appeal No. 63.4764 at the STF, Minister Gilmar Mendes, granted an injunction to suspend the collection. Henceforth, the Supreme Court recognized the general repercussion of the constitutional issue addressed there (Topic 700) and judged the merits in the year 2020.
In the judgment, two constitutional questions were considered. The first of them referred to whether or not the levy of ISS on exploitation of the betting activity is constitutional. And the second aimed to find out the basis for calculating the tax on the game operation service and whether it would be possible to include the full value of the bet or just the value of the tickets or tickets, or even on another taxable basis.
The RE became final in October 2021, with the following thesis being fixed in topic 700:
“It is constitutional to levy ISS on services for the distribution and sale of tickets and other lottery products, bingos, cards, tickets or betting coupons, draws and prizes (item 19 of the List of Services Attached to Complementary Law 116/2003). In this situation, the ISS calculation basis is the amount to be remunerated for providing the service, regardless of the entrance fee, and cannot correspond to the total amount of the bet.”
The decision reflects greater legal certainty for the operator as it ruled out the possibility of expanding the tax calculation base beyond that which is not directly linked to the service. It is estimated that tourism bets move around R$ 300 million annually[5].
As for lotteries, there was the greatest advance in terms of expansion and dispersion of their operations. This was much more due to the Judiciary than to the other Powers. Almost all recent legislation on lotteries has as its vector the decisions handed down by the STF, by virtue of the judgment of ADPFs nº 492 and nº 493 and ADI nº 4986.
The STF unanimously understood, in 2020, that the Union does not have a monopoly on exploration, although it has exclusive competence for legislation. According to the Court, articles 1 and 32 of Decree-Law 204/67 were not accepted by CF/88 and collide head-on with article 25, §1?.
The reasoning behind the votes cast directs the states to exercise residual competence. The Municipalities were cited in the judgment as an obiter dictum, without express reference to these federative entities in the provisions of the Judgments, which would serve to not contemplate them directly with the decision. Considering that there are already municipal laws dealing with the institution of their lotteries, it is possible that there will be a new judicialization.
The decisions have a great impact, as the judgments enable yet another public service, which, consequently, ensures a source of revenue. It is estimated that revenue from lotteries in Brazil is around 0.2% of GDP, on average, while in similar countries it reaches 1%.
Since the final and unappealable decision, the States have moved to implement their lotteries. In addition to those mentioned above, the States of MA, MS, PA, TO, AC, AM, ES, SP, PE, GO and DF; track implementation formats, to explore this public service that generates tax revenues.
From another perspective, it is no longer news that fixed odds betting activity — Sports Betting or Sports Betting Fixed Odds — was legalized in Brazil after the enactment of Law No. 13,756/2018, which is still awaiting regulation by the Ministry of Economy.
In this modality, there are three actors involved in delivering the experience to its final recipient, who will always be the gambler. They are: operators (bookmakers); the suppliers that make the operation possible (platforms, streaming, data, odds, means of payment) and regulatory and integrity institutions.
It is also a public service that can be authorized or granted in favor of individuals. The choice of the delegation regime will have several consequences, facilitating or not obtaining the operating license, in addition to interfering with the modulation of the competitive environment.
It is important to note the recommendation for the inclusion of fixed odds bets in the Republic’s Investment Partnerships Program (PPI) and in the National Privatization Plan, duly monitored by the BNDES and the Ministry of Economy[6].
Due to these nuances, some definitions on taxation were redefined by Law No. 14,183/21, in order to promote better economic and financial viability. The concept of GGR (Gaming Gross Revenue) inspired the amendment of legislation to determine the calculation of Income Tax and CSLL, owed by the operator.
The GGR reflects the difference between the total volume of bets/games played minus the amount of prizes paid. For the collection of PIS and Cofins, the extended calculation base remains, which considers Turnover, which is the total volume of money spent by bettors on games or bets.
The Secretariat for Evaluation, Planning, Energy and Lottery of the Ministry of Economy released a report on Law nº 14.183/21, which amended the chapter of Law nº 13.756/2018, dedicated to the lottery modality of Fixed Quota Betting (AQF), which it was necessary to understand the business, which should not deviate from the operational guidelines enshrined by the market in several countries, in order to keep the business attractive and, of course, encourage good competition.
With regard to the tax paid by the gambler, the taxation on the prize received from websites hosted abroad had already been the subject of a consultation solution before the Revenue, even before the enactment of Law No. the mandatory payment of income tax by the lucky person. The Revenue said, in Consultation Solution 61, that said income is subject to taxation in the form of mandatory monthly payment.
As for the calculation base, the query records that it should correspond to the sum of the winnings earned by the consultant, with no legal provision for the deduction, when calculating the calculation base, of any losses on bets.
Article 31 of Law No. 13,756/2018, edited after the above consultation, provides that the gains obtained with the prizes paid for sports betting will be subject to taxation of 30% through a discount at the paying source, for gains from BRL 1,903, 99.
In the wake of judicialization, we did not identify the existence of majors regarding the legislation edited from 2018, or even the already vast recurrent normative.
It is speculated that with the end of the deadline for the regulation, ending in December 2022, the Judiciary will be called upon to rule on any inertia or gap, or even on the status of operators that have moved to structure and invest in the national market from the publication of the law, in 2018.
Far from the speculative environment, it turns to the role of the Judiciary, now under the bias of criminal/contravention law, to touch on the so-called games of chance, specifically regarding Theme 924 of the STF – RE, in which the reception of article 50 is discussed of Decree-Law No. 3.688/1941 (Law of Criminal Misdemeanors), by which the exploitation or establishment of games of chance is typified as criminal misdemeanors.
The trial was scheduled for March 2022, but was excluded from the trial calendar by the Presidency of the Court.
Do not lose sight of the approval of the relevant regulatory framework for gaming (PL 441/91) by the Chamber of Deputies, in February 2022, which remains under discussion in the Senate. PL 186/14 and PLS 595/15 are still pending in Congress; 2648/19 and 4495/20 aiming to expand the regulation to other types of games and casinos, in integrated resorts.
Eventual approval by Congress of a mature legal framework will legitimize the market and contribute to the unification of legislation connected with current reality, in order to enable a healthy competitive environment, with greater legal certainty and the possible reduction of judicialization.
It must be admitted that we live in a trend of “gamification” of life even in everyday situations, which results in the use of virtual tools to perform the most varied tasks.
Soon, the profusion of online games and betting jumps to the eye, on an internet that already has the necessary technology for increasingly safe and reliable platforms, able to play a fundamental role in the implementation of operations integrity policies, and also in the monitoring of possible distortions in the behavior of bettors. Responsible gaming is one of the pillars of a fair market.
Secap (Secretariat for Evaluation, Planning, Energy and Lottery), the body of the Ministry of Economy responsible for regulation, works with strict internationally tested and approved criteria and protocols in the OECD standard. Highlight for the series of public hearings held to expose the rules through frank interlocution with the most diverse sectors of civil society. Brazil learned from the mistakes and successes of other countries, which puts it in a highly favorable situation for the growth of the national economy.
Play is part of human history and nature. The gaming and betting market has an undeniable strength and thrives whenever it is well regulated.
With this article, we hope to have contributed to demonstrate an increasingly clear trend that the Brazilian State must advance in the regulation, control and dissemination of this market that has a lot to contribute, either through the production chain, or in the promotion of sports in general. It sounds reckless to neglect an annual tax revenue of BRL 20 billion.
As Brazil was one of the last countries to regulate and legalize games, there was enough time and opportunity to absorb good practices into models and eliminate the bad ones. Past mistakes must not compromise the present, much less annihilate the future.
“At gambling, the deadly sin is to mistake bad play for bad luck.” Ian Fleming