Having attended and taken part in a panel discussion during the Online Gaming Summit in Sao Paulo, Hervé Schlosser, CEO of Sportnco, gives his feedback on the new regulations that are working their way through the Brazilian parliament and could turn the country into one of the biggest regulated markets in the world for the online and land-based betting sector.
SBC Americas: What is the latest news regarding regulation of the sports betting sector in Brazil?
Hervé Schlosser: A law has finally been voted by Congress that for the first time will legalise and regulate online and offline sports betting in Brazil. We are now waiting for the decree that will define the regulations. It should be published during first quarter 2020, paving the way for a real opening of the market in the second half of 2020.
SBCA: Do you have more details regarding the financial aspects of this regulation?
HS: The tax rate is based on turnover: 3% for online and 6% for offline. The industry is always pushing for a regulation on a gross gaming revenue (GGR) basis, which is the real revenue of the operators, and therefore a lot of industry players are disappointed by this tax rate.
However, it’s important to remember that a 3% tax rate for online betting is far below the 8%-9% of turnover experienced in Portugal and France. In these countries, the operators have to really fight to generate margins; and there are not many operators (13 for sports in France, but still the markets exist ad are substantial: more than €1bn in GGR are expected in 2019, with an annual growth of 25% over the last four years. In order to get a licence in Brazil companies will need to present a financial guarantee of approximately €4M.
The licensee will also have the possibility to negotiate deals with sub-licensees.
SBCA: What is the potential size of the Brazilian market?
HS: Based on estimates from KPMG from 2017, the online sports betting market could be worth around US$2bn in its first year of regulated activity, while Morgan Stanley says the Brazilian market could be worth around £1.6bn annually within five years. In a country with a population of 211 million, that is sports- and football-mad and has great potential for growth, these forecasts show that for the gambling sector Brazil really is a land of opportunities
SBCA: What are Sportnco’s plans for this newly regulated market?
HS: We started our development in Latin America in 2019, starting with Argentina and the province of Buenos Aires. In partnership with one of our existing European clients, we have met all the technical requirements in order to bid for a licence in the province of Buenos Aires. As you know the process has been halted for political reasons, but it should restart in the near future.
In Brazil, just like in other South American markets that are regulated or soon-to-be, we offer our unique turnkey solution for sports betting, which includes software, odds and risk management, web design and marketing services to:
- existing European clients wanting to grow in Latin America, and
- new clients already operating in LatAm and wanting to develop their online activities.
Depending on the specifics of Brazilian regulation and factoring in the size of the market, we may also consider taking a licence, not to use as an operator, but to agree sub-licence deals with operators who would also use our technology and services in the market.