Brazil’s regulated gambling market is scheduled to launch in January, and the government and gaming industry are working to tackle unregulated gambling in the meantime. The steps Brazilian lawmakers are taking include the blocking of internet access to unauthorized websites and a ban on credit card transactions for online gambling.
Despite the legalization of sports betting in 2018, Brazil’s online gambling industry has long operated as a “gray market.” That means that gambling sites weren’t expressly illegal but operated in a regulatory vacuum, without paying taxes or adhering to local rules. However, in December 2023, President Luiz Inácio Lula da Silva (Lula) signed a law regulating online gambling that will take effect on Jan. 1.
Last week, long before the launch, Brazil began enforcing that law, blocking over 2,000 websites classified as “irregular” by the government. The classification signals that the sites in question have been unwilling to comply with the country’s new online gambling laws.
The move follows heightened concerns about gambling addiction and its impact on Brazil’s most vulnerable populations. Recent government estimates suggest more than 52 million Brazilians began online betting over the last five years.
While once legal, retail casinos and slot machines have long been out-of-bounds in Brazil. And recently, Lula threatened to outlaw online gambling again should regulation not curb Brazil’s growing addiction problem.
Unregulated Sites Get the Axe
According to France 24, online gambling’s popularity has encouraged what Brazil’s Finance Minister, Fernando Haddad, called a betting “pandemic.” As a result, the government is taking steps to rein things in.
In a statement, Haddad said those operators unwilling to be regulated are no longer welcome.
Anyone who is not regularized, or in the process of being regularized, is being taken off the air.
Haddad’s ministry identified 2,040 “suspicious domains,” which it says it asked Anatel, Brazil’s telecoms regulatory agency, to block.
After the cull, 210 websites run by 96 operators remain online. According to the government, those operators were willing to adhere to the new legislation. This willingness, it said, earned the approval to operate while licensing applications are reviewed.
As of the application cut-off date, 113 companies had applied for licensing. It’s unclear if the 17 unaccounted for were rejected or are new operators not yet active in Brazil. Bonus contacted several sources for this story but received no responses.
Shift Away From Credit Starts Early
In other developments, Brazil’s upcoming ban on credit card gambling payments got off to an early start. Industry groups agreed to enact the ban earlier this month before the government’s official Jan. 1 enforcement date.
On Oct. 1, the Brazilian Association of Credit Card and Services Companies (ABECS) approved the measure during an “extraordinary” meeting between banks and credit providers. Additionally, the Brazilian Institute of Responsible Gaming (IBJR) has backed the move, with its membership taking the “voluntary decision” to end credit payments early.
As reported by Correio Braziliense, ABECS attributed the decision to the card sector’s growing concern over unsustainable debt.
Abecs’ decision is based on the card sector’s growing concern regarding the prevention of over-indebtedness among the population and the growth of online betting in the country, which, among other consequences, could generate significant impacts on debt and consumption related to retail and the services sector.
However, ABECS also noted that gambling-related credit card usage has been “insignificant,” while other forms of payment, like Pix, are far more common. Indeed, while presenting Brazil’s Inflation Report in September, Central Bank President Roberto Campos Neto said Pix handles most Brazilian gambling deposits.
Pix is a popular digital instant payment method managed by the country’s central bank. Sector data indicates the platform handles about 90% of gambling deposits. However, there’s disagreement about how often Brazilians use credit for gambling.
Extent of Credit Use Uncertain
Brazil’s National Association of Games and Lotteries (ANJL) estimates players fund less than 3% of bets using credit, while the IBJR claims credit accounts for only 0.5%. However, Campus Neto suggests the amount is much higher, at 10-15% of total transactions.
According to Folha De S. Paulo, Campos Neto said other methods may camouflage credit usage.
Sometimes you can do a credit card transaction with a digital wallet. And the digital wallet performs the transaction and the credit card issuer cannot see what purchase is being made. Looking only at the credit card channel, we cannot always be sure that that credit channel, that card, was not used to purchase that item.
ABECS’s statement echoed that warning.
On the other hand, it is important to debate the veto on the use of other lines of financing for betting purposes. As we know, Pix is currently the most responsible for bids made in online games, having proven to be a means of accessing credit lines, such as overdrafts, and, consequently, an important vector of debt.
Notably, Pix, debit, postpaid cards, TED (electronic transfers), and Boleto, a Brazilian voucher-based payment option, remain accepted payment types.
Brazil’s Gambling Future Hangs on Regulatory Success
Speaking to reporters on Oct. 6, Reuters reported Lula promised to shutter the online betting industry if regulation fails to curb addiction issues.
If regulation doesn’t work, I won’t hesitate in putting an end to (betting) definitively.
While Lula recognized prohibitions don’t typically work, his statement, shared after voting in Sao Paulo’s municipal elections, suggests there’s a limit.
Everyone knows that the person going to buy bread in the morning will make a small bet using the bread money. But what I cannot allow is betting to turn into a disease, an addiction, and for people to become dependent on it, because I know people who lost their house and car.
For IBJR, regulation is the “most efficient and necessary” way to answer these challenges and ensure the protection of consumers and the State.
As the industry’s leading association, we are fully willing to contribute solutions that meet both government concerns and society’s demands… Our objective is to ensure that the sector is regulated in a fair and balanced way, guaranteeing consumer protection and market integrity without compromising its development.
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