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Brazilian Gambling Update

August 25, 2017 Updates

After some time without news regarding the Brazilian Gambling Bills, earlier yesterday Senator Benedito de Lira - The Rapporteur of PLS 186/2014 at the Constitutional and Justice Commission of the Senate has presented his report on the mentioned Bill. Voting shall be expected within the upcoming Commission sessions. We will summarize the most important points below:

 

1) PLS 186/2014 - New Version

a) Definition of Gambling: On this new version of the PLS 186/2014, Gambling is entitled "Fortune Games", and it is considered the game in which winning or losing depends exclusively of mainly on a future random event.

b) Fortune Games: The Bill considers the following to be "Fortune Games" (among others):
-Jogo do Bicho Game;
-Video-Bingo and Video-Game (Online and Live);
-Bingo Games (Halls);
-Casino Games within leisure complexes;
-Betting on Sports and non-sports events (Online and Live);
-Online Casino Games.

c) License Granting: This new version does not use the concession model.
According to this version, the right to operate any kind of Fortune Games will be granted by accreditation by the Union, State, Federal District or Municipal Executive Branch. 

d) Accreditation Responsibility:

Each entity of the Federation will be responsible for the accreditation of at least one activity.
-Jogo do Bicho Game - Municipality.
-Video-Bingo and Video-Game (Online and Live) - The Bill isn't very clear. But it will either be the Union or the Municipality.
-Bingo Games (Halls) - State
-Casino Games within leisure complexes; - Union
-Betting on Sports and non-sports events (Online and Live) - Union
-Online Casino Games - Union

e) The party interested in having a Fortune Games operation must be located in Brazil and established under Brazilian laws.

f) The term for the operation of Fortune Games and other specific provisions:

-For Sports betting, online games, Jogo do Bicho and Bingo the accreditation will be for a predetermined period.

-For Casinos, the accreditation will entitle the holder of the grant to operate for a period of 30 (thirty) years). When determining the cities in which Casinos will be opened, it must be considered the existence of touristic patrimony to be valorized and the potential of social and economic development of the region. The same economic group will only be authorized to have 3 casinos in leisure complexes. 

-For Jogo do Bicho and Video Game, the accreditation will entitle the holder of the grant to operate for a period of 10 (ten years).

-For Bingo Halls, the accreditation will entitle the holder of the grant to operate for a period of 20 (twenty years). It will be allowed a maximum of one bingo hall per every 150,000 people, and for cities with less than 150,000 people, 1 bingo hall will be allowed. In bingo halls, besides bingo games, the only Fortune Game allowed will be video bingo machines.

-For Online Sports Betting and non-sports betting, the server will need to be located within the Brazilian territory.

g) Taxation:
This new version of PLS 186/2014 creates a tax called "Social Contribution on Revenues from Gambling".
The calculation basis used is the gross revenue obtained after the deduction of the prizes paid. 
The aliquot will be 10% for Fortune games operated live and 15% for Fortune Games operated online.

h) Criminal Offense:
At the end of the new version of PLS 186/2014, the Bill considers to be a crime the exploration of any Fortune Game without proper accreditation. The penalty provided is imprisonment from 3 months to 1 year.

Some contacts from Brasilia said confidentially that the Gambling Legalization probably will go ahead now because the government needs to improve the revenue expectation for 2018.
We will be analyzing better this new version of PLS 186/2014 aiming to have it translated soon. 

 

August 14, 2017 Updates

1) President Temer Lawsuit:
A lawsuit was proposed for the removal of President Michel Temer from office. The petition was analyzed by the House of Representatives Plenary, which has decided not to receive it.

This proves that President Temer, as it happened when the Labor Reform was approved, can mobilize many congressmen to vote in his favor, which can be interpreted as a strength demonstration for him.

For the gambling business, this can also be seen as something extremely positive, because President Temer has good eyes for the legalization of Gambling in Brazil. After the rejection of the lawsuit against President Temer, he had his first meeting with the Speakers for the House and for the Senate - Deputy Rodrigo Maia and Senator Eunício Oliveira - to discuss the economic agenda of the Government. 

2) Gambling Bills:
As for the gambling bills, PLS 186/2014 and PL 442/1991, the situation of them has not changed since our previous update.

PLS 186/2014 expects discussions at the Constitution Commission of the Senate and PL 442/1991 is expected to be included in the Chamber of Representative's Agenda for voting.

Now that the lawsuit against Temer was rejected, more development on the Gambling Bills can be expected.

Also, earlier this week, Federal Deputy César Halum gave a speech in the House of Representatives Plenary in favor of the legalization of Gambling by the approval of PL 442/1991. In his opinion, the legalization of gambling can be interpreted as a way to raise public revenue, as an alternative of increasing other taxes to the general population. He has also defended the creation of a "Parliamentary front for the legalization of gambling in Brazil". 

3) LOTEX – Instant Lotteries:
The privatization of the Brazilian instant lottery (LOTEX) was included in the "Programa Nacional de Desestatização" (Brazilian Privatization Program) (Federal Decree nº 8.648), and the Federal Government sees this as a good way to raise revenues. The IRS Ministry will hold the responsibility for the concession granting of the LOTEX operation to interested private parties. This means that Caixa Econômica Federal, the Brazilian Public Bank that holds the current lotteries monopoly in Brazil will have nothing to do with the LOTEX operation. Then, the IRS Ministry intends to entirely sell LOTEX, however, it is still not certain if there will be only one or several private operators. It is estimated that the bidding notice shall be published in September and that the auction to happen in October. 

4) Other Subjects:|
a) Former president Lula has presented an appeal to the decision that has convicted him to a penalty of imprisonment of 9 years and 6 months for money laundering and passive corruption. He will be interrogated by Federal Judge Sergio Moro on September 13th, as a part of another lawsuit. This is the same judge responsible for the first conviction of Lula. 

b) Former Speaker of the House - Eduardo Cunha - has not yet collaborated with the Justice;

c) Bill PL 57/2011 - The Prohibition of Online Betting still awaits to be analyzed by the Finance and Taxation Commission and also by the Constitutional and Justice Commission;

d) Bill PLS 213/2017 - The Prohibition of Credit/Debit/virtual Currency Operations on gambling websites located outside of Brazil awaits to be analyzed by the CAE - Commission for economic issues.

e) The Brazilian Supreme Court has not evolved on analyzing if the prohibition of Gambling is or isn't Constitutional. It has established a deadline of one year to decide;

f) There hasn't been any improvement on a new bill exclusively for Sports Betting;

g) The possible project for Casinos by the Ministry of Tourism has not seen any development recently.  

5) Conclusion:
Now that the lawsuit against President Temer has been rejected and that the Government is aiming to establish the economic agenda, the Gambling bills have good chances to go ahead. Also, it is sure that the model to be used on LOTEX will be by concessions, conducted by the IRS Ministry, with the possible publication of the bidding notice for September and auction in October. We will inform you if anything new happens.

 

July, 2017 Updates

1) Brazilian Politics:
Recently, the former House of Representatives President - Eduardo Cunha - has waived positively to the possibility of having a bargain collaboration with the Brazilian authorities. Cunha is already being held under preventive detention on the "Car Wash" operation for crimes such as money laundering and passive corruption. He was already convicted on first degree. If he decides to say everything that he knows about other politicians and public agents, it is possible to expect great damage on come of the most important Brazilian politicians, who are already facing investigations and/or criminal lawsuits. The repercussion of this action could cause a new delay on the Congress`sessions.

2) Former President Lula's criminal conviction:
Yesterday the former President Lula was criminally convicted as a part of the "Car Wash" operation for a penalty of imprisonment of 9 years and 6 months for money laundering and passive corruption. He is expected to present an appeal and shall only initiate to execute the penalty after the lawsuit is analyzed by the TRF4, the Federal Court of the 4th Region, a second level court.

3) President Temer Lawsuit:
A lawsuit was purposed for the removal of President Michel Temer from the office. The petition will need to be analyzed by the House of Representatives Plenary. If they decide to receive the petition, the formal procedure will have been established, and with it, the president will be requested to step out of the office for at most 180 days. In order for the petition to be received by the Plenary, 342 votes will be needed from House's Federal Deputies.

4) Labor Reform is approved:
The Labor Reform Bill, which was one of the obstacles to the approval of the Gambling bills has been approved by the Brazilian Congress, and will now be forwarded to President Temer for sanction. This demonstrates that, even with the recent scandals involving President Temer and other Politicians, the Federal Government still has strength and influence to have approved controversial/polemic matter in the Congress.

5) Gambling Bills:
As for the gambling bills, PLS 186/2014 and PL 442/1991, the situation of them has not changed since our previous update. PLS 186/2014 expects discussions at the Constitution Commission of the Senate and PL 442/1991 is expected to be included in the Chamber of Representative's Agenda for voting. Now that the Labor Reform has been approved, more development on the Gambling Bills can be expected after the Retirement/Pension Reform Bill is voted by the Congress.

6) Bill PL 57/2011 - The prohibition of Online Betting:
Deputy Edmilson Rodrigues presented in the Finance and Taxation Commission of the House of Representatives, an opinion for the approval of Bill PL 57/2011, which prohibits betting in sports events thru the internet. Now, it shall be analyzed by the Finance and Taxation Commission (CFT) and also by the Constitutional and Justice Commission (CCJ). If approved in such Commissions, the proposal shall go to the Senate. The Bill prohibits betting in an event of a sporting nature by the World Wide Web and makes other provisions. Below, there is a complete version of the bill, in english:

Bill PL 57/2011, of 2011
(From Mr. Luiz Carlos Hauly)
It prohibits betting in an event of a sporting nature by the World Wide Web and makes other provisions.
The National Congress decrees:
Article 1 It is forbidden the exploration of betting games of any nature, including by the worldwide computer network, within the national territory, including in the Brazilian territorial sea and national airspace.
Single paragraph. Exemption from the prohibition established in the caput, federal sports lotteries and federal and state lotteries duly authorized by Law.
Article 2 This Law shall enter into force on the date of its publication.

7) Bill PLS 213/2017 - The Prohibition of credit/debit/virtual currency operations on Gambling websites located outside of Brazil:
Senator Ciro Nogueira, who is also the author of PLS 186/2014 - The Senate's Gambling Bill - has proposed a Bill Project (PLS 213/2017) that can impact current online operations that have Brazilian users. According to PLS 213/2017, it would be prohibited to perform credit card, debit card and electronic currency operations that have as a purpose the participation in Gambling on electronic websites hosted on servers located outside the Country. The project was sent to the CAE - Comission for Economic Issues - and will seen be able to receive amendments.
Below, there is the entire PLS 213/2017 in English:
Senate Bill No. 213, of 2017
Prohibits operations with credit or debit cards or, in addition, in electronic currency that have as purpose the participation in Gambling/games of chance in electronic sites hosted in servers located outside the Country, and other measures.
THE NATIONAL CONGRESS decrees:
Article 1. Transactions with credit or debit cards or, in addition, carried out in electronic currency, whose purpose is to participate in games of chance in electronic sites hosted on servers located outside the country are prohibited from the national territory.
Article 2.
Article 9 of Law No. 12,865, of October 9, 2013, becomes effective with the addition of the following paragraphs 7 and 8:
"Art. 9 ° ................................................ ..................................................
Paragraph 7. The Central Bank of Brazil, in compliance with the guidelines established by the National Monetary Council, shall determine rules for the implementation of control mechanisms designed to prevent credit or debit card issuers, as well as any other payment institutions, Authorize operations with credit or debit cards or in electronic money that have as purpose the participation in games of chance in electronic sites hosted in servers located outside the Country.
Paragraph 8. The Central Bank of Brazil, in compliance with the guidelines established by the National Monetary Council, shall determine rules for the immediate cancellation of operations that fall under the hypotheses of paragraph 7 of this article, being forbidden any transfer of values between bettors and suppliers. " NR)
Art. 3 This Law shall enter into force on the date of its publication.

8) Supreme Court and the Unconstitutionality of Gambling:
The Brazilian Supreme Court was to analyze if the Decree Law 3,688/41, the legislation that provides for the prohibition of gambling in Brazil, was considered unconstitutional or not. The main idea of the debate and discussion is about a possible atypicality of the conduct of operating Gambling/Games of Chance in Brazil. In order for a law (or Decree Law on this case) that is prior to the Constitution to be valid and efficient, it needs to be welcomed by the Constitution. This means that it can not be contrary to the Principles, Rules and Guarantees that the Constitution introduces to the legal system. If a piece of legislation that is prior to the Constitution is not welcomed, it becomes Unconstitutional, and therefore, can not be considered valid anymore. The Court, however, did not put an end to the discussion, and determined a period of 01 year to finish the judgment of whether the Prohibition of Gambling in Brazil is Constitutional or Unconstitutional.

9) LOTEX – Instant Lotteries:
The privatization of the Brazilian instant lottery (LOTEX) was included in the "Programa Nacional de Desestatização" (Brazilian Privatization Program) (Federal Decree nº 8.648), and the Federal Government sees this as a good way to raise revenues. The will of the government is to sell 49% of the shares of this subsidiary for a private operator, which will be responsible for the co-operation of LOTEX with the Government. The expectations are that the privatization of LOTEX may happen in the following months, with the invites for bids to interested private operators for the second semester. The valuation of the minimum price to start the bidding was reduced a lot in the latest weeks, and the expectation is to start in BRL 1 billion.

10) Sports Betting:
There is a good possibility of a new Bill, exclusively for Sports Betting to be presented to the Congress by the Federal Government. The operation method is expected to be like the one explained for LOTEX, with the creation of a Caixa Econômica Federal (Public Bank) subsidiary, with 49% of it sold to one or a few private operators. The operation would be done by the private (s) operator (s), with the government. Probably if the Presidente Temer is kept in office it will happen following the LOTEX`s notice.

11) Casinos by the Ministry of Tourism:
Since our last update, there hasn't been any development on this possibility. According to the Minister of Tourism, it is possible to expect a new project for the implementation of large sized Casinos in specific areas of the Brazilian territory. Given the current political situation in Brazil, for this matter to evolve we would need to expect the approval of the major Retirement reform.

12) Conclusion:
The Brazilian Political situation hasn`t being helping the Gambling agenda, as well as many other subjects and Brazilian needs. The economic situation has been stable even with the Political crisis, but it is a consensus that the Congress agenda needs to follow ahead in all issues. We believe that if the President Temer is kept in office and the Retirement reform is approved, the Gambling project will go ahead.

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