Brazil Gaming Legislation
Gambling in Brazil is prohibited. Despite that, due to the anachronistic nature of this law - as it was approved back in 1946 - online gambling is permitted as the internet is not regulated as part of the Brazilian territory. Physical gambling in Brazil is prohibited due to the impossibility of the government to monitor winnings made in such games.
Gambling is illegal in Brazil, but that doesn't stop Brazilians from gambling. This article presents the common gambling practices in Brazil, and the legal or illegal aspects contained in them.
New legislation would take licensed bingo and electronic gaming machines outside of the scope of a general prohibition on gambling contained in razils 1 947 Criminal Contravention Act. But for now, the only gambling activities that are considered legal in Brazil are lottery games. Brazil – Anti-gaming seminar in Fortaleza aims to derail legislation By Phil - 16 January 2018 An anti gaming front made up of deputies, senators as well as other government officials have argued that legalised gambling could be used as a way to launder money for corruption and money laundering by political parties and candidates. Online gambling: nowadays, online gambling isn't an illegal practice in Brazil, although in 2013 the Commission of Science, Technology, Innovation, Communication, and Computing (CCT) approved a law project, which aims to prohibit online gambling throughout the country. According to the text, to establish, operate or exploit through internet bingo, betting, or any type of gambling is not allowed and may result. The current legislation partially forbids gambling activities in Brazil. The practice of gambling is currently mainly dealt with by the Law of Misdemeanours (Decree Law No. It was drafted with the intention to preserve social morality, in line with the accepted societal values of 1941.
In Brazil the exploitation of gambling and games of chance was old, derived from the first years of the Brazilian Empire. Although, over the centuries, those practices were forbidden and allowed many times by the government.
The explanations were always very similar. Those who agreed to the extinction of it affirmed that those injured moral principles, while the ones that defended it highlighted the economic importance and financial movement that this market gradually conquered.
In 1946, then-President Dutra condemned these practices for a long time. Cities like Lambari and Poços de Caldas (Minas Gerais),Petrópolis (Rio de Janeiro)and other cities –that attracted players and gamblers from all over the world –were shut down. Even the casino hotel constructed in the city of Petrópolis, supposed to be the largest one of Brazil – the Quitandinha Palace – saw its doors closed.
Current Gambling Legislation
Nowadays Brazil condemns some types of gambling, as well as, the realization of games of chance. The practices below are only allowed when operated by establishments, companies, or services authorized by the Brazilian government.
- games in which the winning or the losing depends – exclusively or mainly – on luck
- horse race betting outside the racecourse, or outside any place not authorized to realize this practice
- sports betting
According to the country's constitution, it's forbidden to “establish or exploit games of chance in a public place or accessible to the public'. The practices are illegal if realized in:
- particular houses - between individuals who are not part of the family who lives there
- hotels or houses of collective housing - between their inhabitants
- company's headquarters, society establishments or associations
- establishment designated to exploit this type of game.
Lottery
The Lottery is a raffle system of awards distribution to a group of punters. In Brazil, the Lottery began in 1784, in Vila Rica (now Ouro Preto). Lotteries have spread rapidly throughout the country, being –during the twentieth century – improved in order to give more credibility and transparency to the process.
Legalization and Restrictions
From there until the 1960 decade, lotteries' administration was the responsibility of individuals selected by public bidding, and the term of the lease was 5 years. In 1961, then-President Quadros determined the Union and the State as the only ones competent to legislate over the lottery system, which means that only these two agents were allowed to conduct lotteries in the country.
Nowadays lotteries are very famous and common in Brazil, lots of Brazilians are used to gamble time or another, and some of them actually gamble on it every month. The Quadros determination is still in force, with Caixa Econômica Federal as the one responsible for their administration. There are nine federal lottery products:
- Federal Lottery
- Instant Lottery
- Mega-Sena
- Double-Sena
- Quina
- Lotomania
- Lotogol
- Loteca
- Lotofácil
Brazil Gaming Legislation Definition
In addition to the federal lotteries in Brazil, each state is free to regulate their respective ones. In São Paulo, for example, the state lottery is administered by Banco Nossa Caixa. The 46% of the total amount collected by lotteries is distributed in prizes and the rest is designated to the Federal Government. The money is used for investments in health, education, security, culture, and sports.
Bingo
Bingo is a very traditional game in Brazil, that after then-President Dutra Law, it was only legalized again in 1993. The Law Zico was born to promote sports activities in the country by conceding part of the bingo houses' revenue to sports clubs and federations. In the following year, the first bingo establishments appeared in São Paulo and spread over the whole nation.
The law was replaced by the Law Pelé (1998), that not only continued to authorize the existence of bingos in the country, it allowed the exploitation of slot machines as well. But contraventions started to be reported to the Public Minister and the law was rescinded. The administration of bingos was passed to the Caixa Econômica Federal until the 2001.
After that the country present a period with no federal regulation for game and gambling houses. The bingo house owners conquered injunctions through the court in many States, which allowed them to continue their activities. In 2004 more than 1.1 thousand bingo houses were operating in Brazil, moving more than 200 million BRL per year.
Criminalization
In the same year the President Lula signed a temporary measure that finally determined the closing of bingo establishments and the usage of slot machines in the whole country. The measure wasn't approved by the National Congress, but the practice is still considered a crime.
This unfortunately isn't a barrier to bingo players. In São Paulo only, more than 600 bingo houses continue to operate illegally in the city. The game it's very popular among Brazilians. The houses have employed many strategies to avoid being caught red-handed.
All of them functions in secret places, only known by the players, while some of them opt to change regularly their establishments to avoid being tracked by the police. The Public Ministry has already received information that the police members may be involved in the bingo's schemes, receiving money in order to avoid the closure of these places.
Jogo do Bicho
Brazil Gaming Legislation 2019
As the bingo scheme presented, the illegal games in Brazil became one lucrative business for criminals. The police and politicians are involved with criminals, taking advantage of the high amount of money involved in this “sector”. With jogo do bicho, there isn't any difference, the game is an illegal betting scheme in which individuals gamble over numbers that represents animals.
It was launched in 1892 by a Brazilian Baron in Rio. He was an owner of a zoo and that's how the game got his name: game of animal. The period, in which it was created, was marked by an intense financial speculation and gambling on the stock market that resulted in a trade crisis.
To stimulate sales, traders instituted raffles and premiums to buyers. The Baron watched these new ideas and decided to create a cash prize in the zoo. The visitor who receives an animal card equivalent to the one selected by the zoo in secrecy, would win the prize at the end of the day, when one of the 25 animals would be announced.
Criminalization
Brazil Gambling Legalization
Within that time, the animals started to be associated with numbers series of lotteries and the jogo do bicho started to be widely played outside the zoo. Currently, the game continues to be practiced on a large scale in the streets of major cities, even being considered a criminal practice by the Brazilian law. In 2013, the game completed 121 years of operation and 71 prohibitions by the Criminal Offences Act. The prohibitive legislation did not change the setting scenario of illegality of jogo do bicho in Brazil. According to the study of the portal BNLData, the game has an annual turnover of 12 billion BRL in bets.
Other Types of Gambling
- Online gambling: nowadays, online gambling isn't an illegal practice in Brazil, although in 2013 the Commission of Science, Technology, Innovation, Communication, and Computing (CCT) approved a law project, which aims to prohibit online gambling throughout the country. According to the text, to establish, operate or exploit through internet bingo, betting, or any type of gambling is not allowed and may result in imprisonment from two to five years, and more fines.
- Gambling in cruise ships: ships that have casinos can land in the country. Their passengers, if they were outside the territorial waters, are also allowed to gamble or play games of chance in the ship.
- Gambling in other countries: there's also Las Vegas for those who want to gamble, but for Brazilian residents, it's easier to cross the frontier to a South American country with a less rigid legislation for gambling. Another alternative is the access of foreign gambling sites that offer casino-related games. The Brazilian government doesn't have control over these sites and that's why gamblers usually play their favorite games through them.
Luiz Carlos Prestes Filho: Should we be structuring specific legislation for gambling in Brazil? Referrals to the National Congress and the Federal Supreme Court (STF) may soon regulate money betting games managed by the private sector. If the activity is allowed, it will be a rush!
Luiz Felipe Maia: We are seeing the debate about gamblin maturing in the three powers. The Legislature has been increasingly receptive to the idea of legalizing gambling activities in the country, having already passed laws that created the Instant Lottery and the Fixed Quota Lottery on LOTEX sporting events. There are also a series of bills on casinos and other forms of gambling. The Judiciary recently expressed its opinion about the end of the federal monopoly on lottery operations, and the trial that is scheduled for April that will decide on the constitutionality or not of the ban on gambling in the country. Finally, the Executive, through SECAP - Secretariat of Evaluation, Planning, Energy and Lottery of the Ministry of Economy, has been working to prepare the regulation of sports betting, as well as to be ready to regulate other modalities that may be approved by the Legislative. However, there is a very peculiar phenomenon here in Brazil.
Both the bills and the eventual decision of the Supreme Federal Court that will rule the ban on gambling in Brazil unconstitutional, as well as the decision that ended the federal monopoly on lotteries, end up generating a much broader impact than the desired for that standard level. We ended up trying to legalize, at the same time and in an often-excessive level of detail, different gambling modes. A virtually impossible task, unprecedented in comparative law. It would be much simpler and more efficient to follow the path taken by most countries: a specialized body is created - a regulatory agency, a commission, a department, whatever it is - which will have the competence to authorize and regulate all the modalities of gambling, from casinos and sports betting to internet games and lotteries, including jogo do bicho. This regulatory entity will then be able to define in a technical manner the criteria for operation, inspection and granting of licenses.
For investments to come from abroad, we have to offer guarantees.Is the country ready?Is there legal certainty?
Legal certainty will come with a well-defined regulatory framework. In other words, with laws that guarantee the basic structure for the performance of a regulatory body and an adequate tax burden. After that, a body of technical and independent regulators is needed, which will be able to create the normative framework of technical regulations necessary for the proper development of each activity. In terms of technical training, we are well prepared. The SECAP team has been studying the gambling topic a lot and today is very capable of starting to regulate the theme in the country.
The Productive Chain of Gambling Economy promotes activities in the areas of architecture and graphic industry, accommodation and restaurants, entertainment, and technological innovation, among others. Does tax legislation accompany these activities?How long will it take to structure tax legislation for the gambling sector?
2020 was a year of very important judicial decisions in tax matters related to gambling, which will certainly guide future tax legislation. On June 6, 2020, the Federal Supreme Court ruled that the municipal services tax (ISS) may apply to betting activities and that the constitutional basis for horse racing is the “Take” value (equivalent to Gross Gaming Revenue, that is, “Bets Received” minus “Generated Prizes”). This is a seminal precedent for future discussions on the basis for calculating the taxes levied on the fixed-quota lottery created by Law 13.756 / 2018, so that it can be argued that the ISS can only be levied on the GGR of sports betting. The same argument can be used to question the constitutionality of the calculation basis for the mandatory transfers defined in article 30 of Law 13.756 / 2018, originally defined as the total bets placed ('the proceeds of the collection').
On June 17, 2020, the judge of the 16th Public Finance Court of São Paulo determined that the service tax (ISS) cannot be charged on the total value of poker tournament buy-ins, but only on the portion of the organizer's remuneration (ie buy-in's less prizes). The Municipality of São Paulo appealed, and the case is awaiting judgment by the Court of Justice of the State of São Paulo. These two precedents demonstrate a strong inclination of the Judiciary to the understanding that the prizes paid should not be counted in the calculation base of the taxes to be collected from the operators. This trend must be accompanied by the tax legislator. As for the time for this to happen, it depends only on the political environment for legalizing gambling activities. The tax issue must, necessarily, accompany the legalization, under penalty of the activities being unfeasible or being at the mercy of bizarre understandings of federal, state and / or municipal tax authorities.
Hasn't the time come to promote a large exclusive corporate and institutional congress on tax policy and gambling?
The idea is excellent. It would be very productive to hold a congress with trained people who could produce a document to be taken to the government and to the national congress, with concrete proposals duly substantiated, including the proposal to create a working group.
Should each modality have its tax structure? How to tax poker, lotteries, casinos, bingos, and jogo do bicho? Should each vertical have a tax structure?
In Brazil, it is not common to give different tax treatment by economic activity. Nor is it necessary in the case of gambling. In an exaggerated simplification, the most relevant points are: (1) Definition of gross game revenue as Bets minus Prizes (This definition has an impact on the PIS and COFINS calculation basis); (2) Definition of the gaming service price as Bets minus Prizes (This definition has an impact on the ISS calculation base); (3) Income Tax Exemption on Prizes for Gamblers (On the other hand, there could be an increase in the CSLL rate). There are alternatives to these suggestions, but there are three issues that need to be addressed in order for Brazilian tax legislation to adapt to the reality of gambling activities.
Would it be interesting to create a National Gaming Agency? Would it be better to leave control at the Ministry of Finance?
An agency would be an excellent solution for creating a regulatory framework for gambling in Brazil, provided that its creation law grants the agency the appropriate powers for that purpose and is limited to giving the mandate for the creation, grant, regulation and inspection of games. The law should not try to go into technical or operational details, otherwise we will be stuck in a reality that will soon be overcome by time. Infralegal rules can and should be changed and updated much more quickly than laws, based on technical and non-political criteria. That is why the importance of an independent regulator and, therefore, I believe that the creation of an agency would undoubtedly be an ideal solution. Leaving the gambling sector under the control of the Ministry of Economy, however, is not bad. The SECAP team has developed, in recent years, a great deal of expertise on the subject and is able to properly regulate the market, as long as there are laws that provide support for this. The issue today is much more political than technical, because within the Executive we already have people with the capacity to do the necessary work.
Does the democratic regime favor the regulation of gambling today? Is there a possibility for transparent business management and competent oversight by government agencies? Winston Churchill already said that 'Democracy is the worst form of government imaginable, with the exception of all others that have been tried.' Power disputes and political crises certainly hinder attempts to legalize the activity, as they divert energy and take the government and parliamentarians away from the topic. That is the reality and the price of democracy and the cost of the alternative seems to me much higher. I do believe that government agencies have the capacity to carry out competent supervision of gambling activities. Currently, the control of operations is very sophisticated, through systems and algorithms that allow for remarkably high security. We are a world reference in banking and tax inspection technology. We are fully capable of controlling any casino, bingo, lottery, or sports betting operation. It is enough to have a regulated environment, with clear rules, consistent technical standards, and compatible penalties.
Source: Luiz Carlos Prestes Filho – Executive Director of Tribuna da Imprensa Livre newspaper