Sports betting: Farm expects R$3 billion for grants – 12/06/2023 – Market

The number of companies willing to operate in the sports betting market in Brazil surprised the Ministry of Finance, which is now racing against time to approve the proposal in the Senate and prevent dehydration.

After opening a public call, the department received 132 expressions of interest from companies to participate in the sector — in the regulatory process. The quantity is four times what was initially expected.

The expectation now, according to members of the Treasury, is that around one hundred of these companies will operate in the market. Considering the value stipulated by the project for the grant, this means around R$3 billion to the federal government plus tax collection.

The estimate, however, depends on the text no longer being changed in its main points. Furthermore, it would need to be approved later this year so that it can fully contribute to the government’s fiscal objectives for 2024.

Opposition and conservative sectors of Congress are still trying to change the proposal, especially to remove the loophole for the existence of online casinos.

In the last session of the Senate plenary, for example, the project was on the agenda and there was an expectation that it would be voted on, but the deliberation ended up being postponed, mainly due to demonstrations from these wings of the House — which have been protesting against this point since before.

With many parliamentarians traveling, the issue should be voted on next week.

The proposal that regulates fixed rate betting, which includes sports betting, was sent by the government of Luiz Inácio Lula da Silva (PT) initially as an MP (provisional measure), but later transformed into a bill after agreement with the President of the Chamber, Arthur Lira (PP-AL).

In the House, the deputies stipulated the value of R$30 million per grant —amount paid in exchange for authorization for a company to operate in the sector—, with a term of three years, and maintained a fee for companies of 18% of the gain obtained, as proposed by the federal government.

Parliamentarians reduced the transfer of funds to the social area, while boosting the amount given to two departments currently controlled by the center — Sports and Tourism.

In the Chamber, a section was included that allows internet gaming, which includes online casinos.

The text classifies “real sports-themed events” and “virtual online gaming events” as fixed rate bets — this device includes games, or eSports, but also opens up opportunities for gambling in a virtual environment.

In the Senate, the grant period was extended to five years and the percentage of revenue to be paid to the government was reduced — from 18% to 12%, in the case of betting houses.

Despite the changes, the section about online games was kept in the text.

The device is important because, according to the Ministry of Finance’s expectations, based on markets in other countries around the world, around 60% of the sector’s revenue — and, therefore, revenue — comes from this segment.

The excerpt is criticized by senators linked to the evangelical bench and the opposition, such as Eduardo Girão (Novo-CE) and Carlos Portinho (PL-RJ).

“I believe that it is an exaggeration for us to deal with the project, which was born for real games, virtual games”, says Portinho. He states that he is working to approve amendments that alter this part of the proposal, which in his view would generate few jobs in Brazil.

“Virtual games generate jobs in China and Russia, where the developers of these programs are located”, he says.

“They took a project that was good in essence, and necessary, and included other types of games that raise other concerns. It’s not just about revenue, the government has to be concerned about ludopathy [compulsão por jogos] and with manipulation”, he adds.

Maintaining the device is important for the government, since, without it, the proposal could bring less revenue to the Union, harming the fiscal objectives of Minister Fernando Haddad (Finance).

When the proposal began to be processed, the government anticipated R$6 billion to R$12 billion in revenue. For the 2024 Budget, however, only R$2 billion was foreseen.

However, for this projection, the Treasury used as an estimate that around 30 grants would be granted, a much larger quantity than the more than 130 expressions of interest received by the department.

Now, there is an expectation of R$3 billion in authorizations, not counting what the Union could receive in tax collection.

People involved in the negotiations in the Senate, however, attribute this number to the form of the project as it is now, since the public call was opened by the Treasury based on the current report.

Pressured to achieve the fiscal target for 2024, the Treasury hopes that the betting project will be approved later this year, but is concerned about the short deadline there is for this — after passing the Senate, it still needs to return to the Chamber, before going to sanction.

Furthermore, a series of other economic measures still need to finish being processed in Congress by the end of the year, especially Tax Reform. And the government is also negotiating with parliamentarians to try to maintain the vetoes applied by Lula to the Carf projects, the fiscal framework and the payroll tax exemption — all of which are fundamental to the Executive’s economic plans next year.

“Brazil should be the largest place in the world for betting operations in 2025. As a result of attractive taxes for players and competitive for betting houses. And the winner is the Brazilian people with extra resources, applied in various segments”, stated the rapporteur of the text in the Senate, Angelo Coronel (PSD-BA).