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Operators in Brazil who have not already applied for a licence have been told they must exit the market completely by October 1, in a surprise announcement by the country’s regulator.
An ordinance published on Tuesday (September 17) by the Ministry of Finance's Secretariat of Prizes and Bets (SPA) specifies that any company that has not applied for a licence as of September 16 will be required to leave Brazil by the end of this month.
From October 1, authorities will be instructed to begin blocking websites that still target Brazil and taking steps to interrupt service providers that continue to support unauthorised operators.
Any company that has already applied for a licence for Brazil’s forthcoming regulated market can continue to operate, provided they are granted separate approval from the regulator.
The secretariat has ordered all operators with pending applications to submit a separate disclosure form before September 30, detailing the brand names and web addresses they will use to serve the Brazilian market during this interim period.
Executives from operators applying for temporary permission will also have to sign a declaration pledging that no other brands or internet domains will be used to provide gambling in Brazil.
Licences in Brazil are set to take effect from January 1 next year, at which point any operators without approval would have become fair game for enforcement, but the decision to effectively ban much of the existing grey market three months early marks a sudden escalation of that policy.
The country’s top gambling regulator, Regis Dudena, said in a statement that the ordinance has come as a reaction to increasing evidence of criminal behaviour by disreputable online gambling operators that are currently benefiting from the transitional phase to a licensed market.
Online gambling has received a series of negative headlines in recent weeks, including over the arrest of prominent social media influencers for promoting online gambling operations that are being accused of money laundering. A group of 31 Brazilian senators even called this week for a parliamentary commission to formally investigate illegal betting.
"We will maintain the adaptation period until the end of December only for those who have already demonstrated that they want to act in accordance with the law, in accordance with Brazilian rules," said Dudena in a statement.
"Many police operations involving companies that operate in the betting market in a criminal manner have come to light. This was the way we found not to wait until January to start separating the wheat from the chaff," he added.
"We want to protect the mental, financial, and physical health of the bettor by curbing the activities of companies that use sports betting and online games as a means to commit fraud and money laundering."
Lisa Worcman, gambling lawyer and partner at Mattos Filho law firm, told Vixio GamblingCompliance that the new ordinance “is clearly a reflection of the recent operations that have taken place in Brazil and the public reaction”.
In an apparent warning to both operators who are applying for a licence and those now forced to abandon the grey market, the regulator said it will take into account how companies comply with the new ordinance when assessing applications.
Operators forced out of the market by the new rules must keep their websites available until October 10 to give customers a chance to withdraw any remaining funds. From October 11, they will be "banned and will be taken offline", the regulator said.
The move by the SPA also comes amid wider concerns among Brazil-facing operators that the industry's reputation risks being scorched before the Brazilian market is even regulated.
Responding to a series of recent published reports that have claimed many Brazilians are betting above their means, five industry trade groups published an open letter on Monday protesting accompanying allegations that the industry is exploiting vulnerable people.
The five groups argue that, as the Brazilian market is unregulated, the attitudes of “serious companies” dedicated to protecting consumers are not currently reflected by the general excesses of the grey market.
“Working against regulation is the same as supporting the permanence of illegal websites in the country, without the slightest concern for the good rules of the regulated market. It means empowering those against whom the government fights, serious companies fight and society should fight,” said the groups, who include operator association ANJL and betting integrity body ABRADIE.
Under a May 22 ordinance, gambling operators in Brazil were told that if they applied for a licence by August 20 they would be guaranteed a decision on their approval before the end of a transition phase on January 1.
A total of 113 operators applied by that date, but anticipated M&A activity and hefty financial requirements mean few observers expect that number to all be approved.
Although the shifting enforcement deadline may have been motivated by political or media pressures, the move by the SPA still aligns with the provisions of both Brazil's December 2023 law and the May licensing ordinance, according to Fernanda Meirelles, a partner at FAS Advogados in Sao Paulo.
"Regardless of the reasons behind the regulator's decision, the new act clarifies its interpretation of the deadlines and makes it clear that the intention is to ban illegal activities immediately, rather than waiting until January 2025," Meirelles told Vixio.
Additional reporting by James Kilsby.
