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Brazil’s betting regulator has shuffled its pack to give officials more bandwidth to review all 113 licence applications that were submitted before a key deadline last week.
Published on August 22, Ordinance 1.309 temporarily reassigns staff from the oversight and enforcement divisions of the Ministry of Finance’s Secretariat for Prizes and Bets (SPA) to the SPA’s undersecretary for authorisations.
The ordinance specifically enables public servants assigned to those divisions to help in the review of licence applications and “the preparation of technical reports that will support decision-making with respect to authorisation petitions”.
The new ordinance was published after the SPA received significantly more applications than most observers were expecting, with the regulator also challenged by its own timeline, as set by the May 22 decree that kicked off the national licensing process for sports betting and online gaming in Brazil.
That May ordinance obliges the SPA to issue a decision on all applications submitted by an initial August 20 deadline within a period of no more than 180 days, or by November 18.
The deadline is designed to give successful applicants enough time to then pay an upfront fee and submit technical compliance certificates to receive their licences and go live before January 1, when new legal prohibitions on unlicensed operations are due to take effect.
An additional challenge for the SPA, however, is an inter-ministerial agreement that grants Brazil’s Ministry of Sport a period of up to 45 days to conduct its own review of licence applications.
To notify successful operators by November 18, the SPA would need to start the clock ticking with the Ministry of Sport by early October.
The reassignment of the SPA’s staff to licensing work likely reflects both the larger than expected volume of applications and the regulator’s commitment to meet the transitional deadlines set by its initial licensing ordinance, said Fernanda Meirelles, a partner at FAS Advogados law firm in São Paulo.
The SPA has already begun preliminary reviews and provided feedback to some applicants, Meirelles told Vixio, although it is not yet clear how active a role the Ministry of Sport will actually play in the process as regulations specify that the ministry’s consent will be deemed to be granted unless objections are raised within the 45-day period.
“If the December/January deadline were to be extended, it would undermine the credibility of the regulator, especially for companies that rushed to submit their applications on time,” Meirelles said. “Therefore, I strongly believe that the deadline will remain unchanged.”
Although the 113 applications exceeded most expectations, Fabio Ferreira Kujawski of Mattos Filho law firm said it was not entirely surprising since more than 130 companies registered an interest in obtaining a Brazilian licence during a preliminary process held last year.
“While extending deadlines is possible, we believe that the SPA has sufficient personnel to process all filings within the given timeframe,” Kujawski said.
Brazil Licences In High Demand
Despite the late surge in applications, it is not clear just how many of them will ultimately be approved by the Brazilian regulator within the initial 180-day window.
Alongside evidence of their financial and legal suitability, applicants are also required to meet a range of additional licensing criteria that include naming qualified officers in specific roles and demonstrating sufficient operational experience within the gaming industry.
According to the May licensing ordinance, applicants will have up to 15 days to submit any additional information requested by the SPA during the course of its review.
But if companies themselves choose to submit amended documentation, including naming any additional "skins" or brands that they intend to deploy, then their applications will treated as though they were new and may no longer be subject to the fast-tracked process.
It has also been noted that operators have not had to pay an application fee and are not on the hook to pay the R$30m (US$5.5m) upfront fee or show proof of payment of minimum social capital or financial reserves until after they are notified that their applications are successful.
That has fuelled speculation that a number of the 113 initial applicants may be acting opportunistically, with at least some expected to withdraw before having to make those financial commitments, unless they can find an investment partner in the interim.
Still, even if only half are ultimately approved, that would make Brazil one of the most competitive online gambling markets globally and allow the federal government to collect more than US$350m in upfront fees before the end of this year.
In a statement, SPA secretary Régis Dudena lauded Brazil’s initial licensing phase as a “success” and said the high demand showed there were “many serious companies that intend to act in compliance with the law”.
Legal experts also believe the high interest at least partly reflects a series of policy decisions taken by the SPA during the course of its rulemaking process.
One “key factor”, said Kujawski, was the SPA’s clarification that international operators could meet a statutory requirement to be at least 20 percent Brazilian-owned by applying via a Brazilian legal entity, without needing a local investment partner.
Meirelles agreed that interpretation meant a potentially material barrier-to-entry “has essentially become a non-issue” and “undoubtedly facilitated the entry of foreign entities into the market”.
It is also inconceivable that so many operators would have applied had the regulator landed upon a more restrictive interpretation of the permissible types of online casino games authorised by Brazilian law, as had been feared before a late July ordinance expressly recognised a full range of products.
“I believe the large number of applications is a direct result of the positive regulatory developments,” said Luiz Felipe Maia, founding partner of Maia Yoshiyasu Advogados. “The online gaming ordinance was critical to making most operators comfortable enough about the future offering in the regulated market.”
