Ministry of Finance defines rules for fixed-odds betting authorization

On May 22, 2024, the Ministry of Finance’s Secretariat of Prizes and Betting (“SPA/MF”) published SPA/MF Ordinance No. 827, of May 21, 2024, providing for the rules and conditions for obtaining authorization to operate fixed-odds betting by private economic agents across Brazil.

Some of the highlights of the new ordinance include:

• Final deadline for authorization:
  • The ordinance sets a deadline of December 31, 2024, for companies in operation in Brazil at the time of the publication of Law No. 14.790/2023 to obtain the necessary authorization.
  • Filing the request for authorization by August 20, 2024, will ensure that the authorization will be granted by December 31, 2024, provided that all requirements of the ordinance are met.
  • Starting from January 1, 2025:
    • Companies without authorization from the SPA/MF will be subject to applicable penalties.
    • In addition, financial institutions and payment providers must not authorize or execute transactions involving fixed-odds betting by unauthorized legal entities.
• Main requirements to obtain authorization
  • • • To obtain authorization to operate in Brazil, companies must, among other requirements:
        • Prove legal qualification, fiscal and labor regularity, probity, economic-financial qualification, and technical qualification. Interested parties must submit all required documents through the Betting Management System (SIGAP) of the SPA/MF (https://sigap.fazenda.gov.br).
        • Prove that a Brazilian holds at least 20% of the paid-in share capital.
        • Pay a flat fee of BRL 30 million.
        • Register with the Board of Commerce with the main corporate purpose of “Commercial Operation of Fixed-Odds Betting,” using the National Classification of Economic Activities (CNAE) 9200-3/99, subclass “Commercial operation of gambling and betting not specified previously.”
        • Implement, in addition to the policies already established in Law No. 14,790/23 (such as prevention of money laundering, responsible gambling, customer service, and integrity), a code of conduct and dissemination of good advertising and propaganda practices, a liquidity risk management policy, an information technology continuity policy and a corporate governance structure compatible with the complexity, specificities, and risks of the business.
  • A legal entity that is a branch, subsidiary, agency, or representation in Brazil of a legal entity based abroad is not eligible for authorization to operate fixed-odds betting.
  • Financial requirements – “main” authorization:
    • Financial accounting provision: The company must have a reserve of at least BRL 5 million.
    • Share capital: The company must have paid in a minimum capital of BRL 30 million in cash.
    • Net worth: The company must have a minimum net worth of BRL 30 million.
  • Financial requirements – additional authorizations (more than three brands):
    • If a legal entity requests additional authorizations, aiming to operate more than three commercial brands, they must comply with additional requirements:
      • Payment of authorization grant: The company must pay an authorization fee of BRL 30 million for each granted authorization act.
      • Financial accounting provision: The company must have a reserve of at least BRL 5 million.
      • Share capital and net worth: The company must pay in a share capital of BRL 15 million in cash and maintain a net worth that is not lower than the share capital for each granted authorization act.
• Requests for change of control and corporate reorganizations
  • The authorization granted for the operation of the fixed-odds betting lottery can be reviewed if changes occur in the authorized company, such as a merger, spin-off, incorporation, transformation, or change in direct or indirect corporate control.
    • If any of the changes occur, the company will have 30 days to submit to the SPA of the Ministry of Finance all necessary documentation to prove compliance with the ordinance and other applicable regulations.
    • The company can make a prior consultation with the SPA to ensure that the planned changes will not result in the review of the granted authorization.
      • The SPA will have up to 150 days to analyze the case, calculated from the submission of the documentation or formalizing the consultation.

Demarest’s Public & Regulatory Law, and Telecommunications, Media and Technology teams are monitoring the matter and remain available to provide any necessary clarifications.