Law 14.790: catalyst for iGaming expansion in Brazil

1. Background

Law 14.790 is not the first gambling regulation in Brazil; its predecessor, Law No. 13.756, introduced the sports betting lottery back in 2018 and authorized the Ministry of Finance to regulate the issuance of licenses. The substantial progress, however, did not happen until the summer of 2023 when Bill 3626/2023 was introduced for discussion with the Brazilian government. After intense scrutiny from the Senate and Chamber of Deputies - Bill 3626/2023 received final approval from the Chamber of Deputies on the 21st of December and moved to President Lula da Silva for final signature. The President, even though he opted to use the partial veto, delivered final approval, leading us to where we are today.

2. Authorization

Local companies and foreign operators interested in operating in Brazil will have to obtain authorization from the Ministry of Finance. The authorization may cost up to 30,000,000 BRL and permit using up to three company brands. The authorization may be valid for up to 5 years, allowing operators to accept bets on sports events or online games. The authorization may enable the operator to access virtual, physical, or both forms of bets. 

There are imminent regulations to be published by the Ministry of Finance specifying the other requirements for companies to get authorization.

3. General requirements 

On the topic of locality, the law requires operators to have entity based locally and established in accordance to Brazilian laws. In practical terms, operators must have their headquarters and management in Brazil. Similarly, the law has a controversial obligation for a company to have a Brazilian party as a shareholder with a minimum of  20% of the entity's share capital.

Regarding tax rate - the operators can expect a rate of 12% on gross gaming revenue, whereas bettors will be taxed 15% of their net winnings annually.

4. Money Laundering & KYC

Importantly, for operators to obtain authorization and avoid future fines, the adoption and implementation of responsible gambling policy and money laundering controls and procedures is of uttermost importance. Proper implementation of a responsible gaming policy will require operators to check and ensure that only persons above 18 years of age can participate. The money laundering controls, on the other hand, require the identity verification process to be completed for bettors as required under Brazilian legislation. Moreover, in order to enable prospective bettors to open an account and perform monetary transactions, the law further introduces a novel requirement of verifying the bettor’s identity by using facial recognition technology. 

5. Key points to monitor

Besides the previously mentioned - Brazilian shareholder requirement, Law 14.790 has a couple of other interesting elements that we are likely to hear legal discussions about in the future. For example, the law stipulates that operators can only obtain one federal or state license.

Logically, it is unclear what process, if any, will there be for operators who have obtained the state license but wish to operate throughout Brazil now. Similar ambiguity is up there on offshore operators as the Brazilian government has not elaborated yet on how they can transition and by which procedure into the current authorization regime.

6. Next steps

Law already contains enough technical and administrative requirements so that businesses interested in obtaining authorization can start the process to understand the requirements and how they can approach compliance. 

That being said, whereas starting the process as soon as possible is crucial, we recommend all interested parties to keep their eyes sharp and monitor developments in the regulatory area. As we have mentioned in this blog, the Ministry of Finance is soon expected to publish a number of additional regulatory pieces that will play an integral role in creating a comprehensive picture of gambling regulation in Brazil under Law 14.790.

7. How is Veriff helping gaming operators?

The gaming industry has high hurdles to clear — such as costly and complex regulatory requirements and delivering a bespoke user experience that differentiates your brand and minimizes friction. Veriff is helping gaming companies across the board. Veriff makes things as quick, simple, and user-friendly as possible while supporting compliance requirements.

• Verify players the first time
  Improve your conversion rates with an easy and straightforward verification flow which helps real players get verified on the first try. Confirm players´ ages with one simple integration.
• Make onboarding simple
  Know that people who are using your platform are who they say they are and keep your online community safe. Get people playing with no hassle — Veriff provides an intuitive and inclusive process that allows users to use the device or platform of their choice whether that be iOS, Android, or the web.
• Reduce errors
  Leverage industry-leading AI and data extraction to prefill forms with data from a government-issued identity document, while mitigating manual input error.
• A layered approach
  We can combine face, document, device, and network diagnostics with video-based behavior analysis to mitigate sophisticated advanced and recurring fraud such as chip dumping, bonus abuse, and multi-accounting.