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Sports betting MP is approved

Understand what changes in the market with the regulation

New provisional measure allows the market to operate in a legal and transparent manner, but brings to Brazil one of the highest tax rates for operators and bettors ever recorded worldwide for the sector, points out an expert. 

Approved by the federal government last Tuesday (25), the provisional measure (MP) that regulates the sports betting sector should directly impact the operations of bookmakers. The rules are already in force, but must be analyzed within 120 days by the National Congress. 

Under the proposal, companies will be taxed at 18%, added to other taxes such as IRPJ, CSLL, PIS, Cofins and ISS, a rate equivalent to 30% of income tax on prizes above the amount of BRL 2,112 may be reached, at same rate charged on lottery prizes that exist in the country, placing Brazil with the highest tax rate in the world for the sector. 

The measure on fees has raised debates among specialists about the impact on the sector and on government revenues. For Leonardo Baptista, CEO and co-founder of Pay4Fun, a payment institution authorized by Bacen and which operates in the online entertainment and sports betting sector, the tax proposal could have negative consequences, discouraging other companies from entering the legal market and, consequently, generating a practical reduction in government revenue collection. 

“The new MP comes to meet a growing demand for regulation in the sector, establishing a regulatory framework that brings more transparency to games, offering more security to transactions, however, the imposition of a higher tax burden may compromise the viability and competitiveness of companies operating in this segment, leading bettors to seek alternatives in the parallel market, which could further harm government revenue and the inspection of these activities”, warns the executive. 

See some of the main changes that the MP will bring to the sports betting market with a focus on fixed odds lotteries in Brazil: 

Institutions regulated by Bacen are the only ones authorized to operate in the sector 

Only institutions authorized by the Central Bank of Brazil (Bacen) can offer accounts for bettors to make payments on fixed odds bets and receive any prizes. In this way, bettors can feel safer when carrying out their financial operations, knowing that they are dealing with regulated institutions that are subject to strict controls and compliance requirements, to avoid any illicit practice. 

“Since the beginning, Pay4Fun has sought to position itself as a payment institution regulated by Bacen, and this strategic choice gives us confidence that we are following the right path. Our highest priority has always been to provide a safe and transparent environment for our users, and the new MP only reinforces our commitment to guarantee the protection of our customers’ interests in all operations carried out”, says the executive. 

Mandatory transparency in games 

The regulation also brings integrity and transparency to the sport itself, avoiding manipulation of bets and game results. “With the regulation, bookmakers are required to follow ethical standards and disclose relevant information in a transparent manner, from the odds of each bet to the criteria used to determine winnings and payouts. This reduces the margin for irregularities and promotes users’ confidence in the system”, points out Camila Caresi, director of governance, risks and compliance at Pay4Fun. 

Tax rates of up to 30% 

Another change for the sector is the tax rate on the revenues of companies operating in this market. Bettors will be subject to a 30% tax on winnings that exceed the amount of BRL 2,112. The measure also establishes a rate of 18% on the so-called Gross Gaming Revenue (GGR), which represents the total revenue obtained from all gaming activities, deducting prizes paid to players and taxes levied on companies, placing the country with the highest taxation in the world in the segment. 

Industry Advertising Guidelines 

Within the scope of regulation, the sports betting sector will have specific guidelines for advertising, and the National Advertising Self-Regulation Council (Conar) will be the body responsible for supervising and regulating actions, seeking to promote an ethical and safe betting environment for bettors. Brazilian consumers. 

Gambler’s protection 

Betting companies must adopt measures to protect players and the sport, prohibiting the participation of minors under 18 and people registered in credit protection registers. The actions seek to avoid financial losses for the most vulnerable and ensure a safe and ethical environment in the sector. 

Part of the taxes reverted to Society 

Tax collection should be directed towards social investments. The resources should be destined to investments in areas such as education, health and safety, promotion of sport in childhood and youth. 

Control of betting frequency and limit 

Controlling the frequency of bets and setting limits will also come with regulation, thus avoiding Ludopathy, an addictive behavior that consists of playing and betting successively and out of control. Bookmakers will be obliged to monitor and prevent these types of behavior, controlling the habits of players and imposing limits when betting. 

About Pay4Fun 

Founded in 2018, Pay4Fun is the first payment institution operating in the sports betting sector to receive authorization from the country’s Central Bank. Operating with more than 400 integrated sites in the entertainment segment, the company reached the mark of BRL 2.4 billion in financial transactions in 2022 and believes in the expansion of the online betting market around the world. The company was considered the Best Payment Method for Latin America in the award promoted by SAGSE 2022 and chosen as the Best Payment Method at the Brazilian iGaming Awards. To learn more about the company, visit the website or connect through Linkedin

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