Gaming

As an introductory note, gambling and betting activities are, since the enactment of Decree-Law 9.215 in 1946, which enforced article 50 of Decree-Law No. 3688/1941 (the Law of Misdemeanours), considered criminal contraventions and therefore are prohibited in Brazil. Since then, the debate over the Brazilian legislation regarding this matter has been recurring. After several years of discussions, the Brazilian Congress seems to now be taking the final steps to allow the commercial exploitation of gambling (see ‘Update and trends’). In any event, Brazilian law provides two exceptions to this rule, namely the state-run lotteries and horse races carried out at authorised racecourses (see question 7).

The Law of Misdemeanours characterises gambling as:

• a game where the gains and losses depend exclusively or predominantly on luck;
• bets on horse races carried out on unauthorised racecourses - note that online horse race betting is also prohibited according to a court decision issued in 2013; and
• bets over any other sport competition.

Moreover, for gambling to be considered a misdemeanour under Brazilian law, the gambling activity must be established or explored in a public location or accessible to the public, regardless of whether a fee is charged to enter into said location. For criminal purposes, the following can also be considered as locations accessible to the public:

• a private house where gambling takes place in which people other than the family that lives in the house commonly participate;
• a hotel or collective housing where gambling is offered to its guests and residents;
• a head office or premises of a company or association in which gambling is carried out; and
• a business unit intended for the exploitation of gambling, even if such intention is concealed.

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Considering that the Law of Misdemeanours was enacted in the 1940s, there is no specific provision in Brazil setting forth rules or concepts related to remote or other cross-border gambling activities.

In this sense, although the current market practice in Brazil demonstrates that wagers in remote gambling activities are considered to have taken place in the location of the operators’ servers, it remains unclear whether there is criminal liability if servers hosting online gambling sites are based in a country where gambling and betting are permitted.

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Since gambling is prohibited in Brazil (see question 1), there is no age limitation for gambling to be considered legal.

However, with respect to lotteries and horse race betting, the participant can participate in such activities when he or she reaches 18.

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The Law of Misdemeanours provides different penalties depending on the kind of unlawful activity carried out, such as the following:

• establishment or exploitation of gambling in a public location or accessible to the public (see question 1): imprisonment of three months to one year, plus a fine and loss of the furnishings and decorations of the location where the gambling was held;
• promotion of lottery without legal authorisation, or sale, storage or circulation of unauthorised lottery tickets: imprisonment of six months to two years, plus a fine and loss of the furnishings of the location where the unauthorised lottery was held;
• sale, storage and circulation of foreign lottery, raffle or tombola tickets: imprisonment of four months to one year plus a fine;
• sale, storage and circulation of state lottery tickets in territories where such tickets are not authorised to circulate: imprisonment of two to six months plus a fine;
• exhibition or possession foreign lottery lots: imprisonment of one to three months plus a fine;
• printing or the execution of any service related to the production of tickets, lots, signs or banners related to lotteries in unauthorised locations: imprisonment of one to six months plus a fine;
• distribution or transportation of lottery banners, lots or notices in unauthorised locations: imprisonment of one to three months plus a fine;
• promotion of lottery announcements, notices or drawings in locations where the respective tickets are not authorised to circulate, by means of newspapers, radio, cinema or any other form of advertisement: a fine;
• exploitation or organisation of the ‘animal game’ lottery (Jogo do Bicho) or practising any act related to its exploitation or organisation: imprisonment of four months to one year plus a fine.

Jogo do Bicho is an illegal and popular gambling game in Brazil, which consists of a lottery-type drawing operated on a regional basis by ‘bicheiros’. Unlike most state-operated lotteries, any amount of money can be bet in Jogo do Bicho.

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Yes, the Law of Misdemeanours provides that gamblers are also subject to a fine of 2,000 to 200,000 reais, regardless of whether the gambling was land-based or carried out remotely (eg, through the internet or any other form of communication).

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Although there are no exceptions expressly provided in Brazilian law for gambling activities other than lotteries and horse race betting (see question 7), there is a social perception in Brazil that minor gambling is a tolerable activity in some places, hence why games such as Jogo do Bicho or social bingos are so popular. In this sense, it is also common to see private and non-profit agents organising raffles and other similar activities to raise money for a specific reason or cause (eg, churches raising money for refurbishments or a certain social event, or athletes raffling sports gear to raise money to participate in a certain competition).

In addition, although Brazilian case law has consistently prohibited most gambling-related activities, a more flexible approach has been demonstrated towards poker games, mainly because of arguments that poker is not simply a ‘game of chance’, which is prohibited under Brazilian law, but rather a game of skill.

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As described above, general gambling activity is not allowed in Brazil. With respect to the gambling activities expressly authorised by law, the following are relevant.

Lotteries

Brazilian law considers lotteries as a public service exclusively carried out by the federal government (which is why it is known as the Federal Lottery) that is not susceptible to concessions. The Federal Lottery Administration Service regulates the Federal Lottery, while the Brazilian Federal Savings Bank promotes it in national territory.

The Federal Lottery Administration Service has powers to supervise, coordinate, inspect and control the execution of the Federal Lottery services across the national territory. Such powers include:

• establishing agreements with the Brazilian National Mint to print lottery tickets;
• guaranteeing that the rules related to minimum prize distributions and limitations on issuance of lottery tickets are observed by the Brazilian Federal Savings Bank; and
• withholding and paying income taxes levied on the prizes.

There are three types of federal lottery:

• draws (Mega-Sena, Lotofácil, Lotomania, Dupla-Sena, Timemania and Quina);
• numbers (the Federal Lottery);
• sports prognostics (Loteca and Lotogol).

Horse races

Decree No. 96,993 of 1988 provides that the Coordination of Creation of the National Horse Commission (CCCCN), a government agency subordinated to the Ministry of Agriculture, has the authority to, among other things, authorise and inspect the exploitation of horse race betting, with or without obstacles. Unlike lotteries, bets on horse races can be carried out by private agents, upon the authorisation of the CCCCN.

Among such responsibilities, the CCCCN has powers to:

• celebrate agreements with public authorities involved in the equine industry to perfect CCCCN’s objectives;
• analyse requests to explore horse race betting and, if all conditions provided by law are met, issue the relevant patent letter authorising such exploitation;
• authorise the operation and accreditation of betting agencies;
• review monthly reports prepared by the authorised racecourses;
• inspect the authorised racecourses’ books, balance sheets and any other documents deemed necessary; and
• issue rules on doping controls, observing international standards on the matter.

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Law No. 9,613 of 1998 sets the regulatory framework regarding money laundering and counter-terrorism financing measures in Brazil.

Although there is no specific rule under Law No. 9,613/1998 related to gambling licensees, it is important to note that the Control Counsel of Financing Activities, a government entity subordinated to the Ministry of Finance, is the entity responsible for receiving and processing reports on suspicious transactions and applying penalties to activities related to money laundering.

Therefore, lottery operators must comply with certain obligations provided by Law No. 9,613/1998 and Resolution No. 15/2007, such as:

• customer due diligence obligations;
• identification and reporting of suspicious transactions; and
• record-keeping obligations.

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Brazilian regulation allows the Brazilian Federal Savings Bank to grant to private companies and individuals a concession to operate as lottery retailers, selling all types of official lottery. The bidding process follows Caixa Circular 621/2013 and Federal Law 8,987/1995, and the specific requirements of each bid. The concession is granted for a term of 20 years, automatically renewed for the same period, except when the retailer is in breach of its obligations.

With regard to horse races, the CCCCN is the agent that authorises the activities of hippodromes and retailers, following the content of Federal Decree 96,933/1988.

As discussed above, other types of gambling and land-based gambling are currently prohibited in Brazil.

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Not applicable, since gambling activity is prohibited in Brazil.

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Not applicable.

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Not applicable.

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Not applicable.

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Not applicable.

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Brazilian law provides that prizes won on lotteries, horse races or any other kind of prize draw are subject to the following withholding tax:

• for prizes paid in kind to:
• residents in Brazil - 30 per cent of the prize;
• residents abroad - 15 per cent of the prize; and
• residents in a low-tax jurisdiction - 25 per cent of the prize; and
• for prizes paid in goods or services to:
• residents in Brazil - 20 per cent of the prize;
• residents abroad - 15 per cent of the prize; and
• residents in a low-tax jurisdiction - 25 per cent of the prize.

In the case of a prize paid to the owner of the horse in turf competitions, a withholding tax of 15 per cent is applied. In this case, if a legal entity is the owner of the horse and subject to the real profit regime taxation, the amount paid as withholding tax shall be deducted from the amount due as corporate income tax. In all other cases, the above-mentioned 15 per cent tax is the final income tax levied over those premiums.

In the case of prizes paid to Brazilian legal entities, such entities are also subject to PIS/COFINS and CSLL taxes.

It is also worth noting that Law No. 7,291/1984 establishes that horse race betting operators must pay a monthly fee to the CCCCN based on the amount of bets taken in the previous month, less the amount paid as prizes. The percentage that shall be paid will be based on the reference value (RV) published by the CCCCN and according to the following progressive accumulative scale.

Revenue on bets equal to:

• between 1 and 2,500 multiplied by RV - shall be exempt;
• between 2,501 and 3,500 multiplied by RV - a 0.5 per cent rate will be applied;
• between 3,501 and 4,000 multiplied by RV - a 1 per cent rate will be applied; and
• over 4,001 multiplied by RV - a 1.5 per cent rate will be applied.

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As discussed above, gambling is prohibited in Brazil and said prohibition also applies to online and mobile gambling.

Nevertheless, in the past 10 years Brazil has discussed the legitimacy of poker games. The outcome on said discussions has been that poker is a game of skill rather than a game of luck, and as such cannot be considered as gaming and may be practised in Brazil. The prohibition exists on betting in poker as it exists in any other sport.

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Not applicable, since gambling activity is prohibited in Brazil.

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Not applicable.

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Operators located abroad cannot offer internet gambling to consumers located in Brazil. Law 13,555 from 2015 added a new paragraph 2 to article 50 of the Law of Misdemeanours to punish with a fine from 2,000 to 200,000 reais both the operator and the consumer, regardless of whether gambling is land-based or carried out remotely (eg, through the internet or any other form of communication).

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Not applicable, since gambling activity is prohibited in Brazil.

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Brazilian law does not differentiate land-based gambling from remote gambling. Therefore, the same tax rules enforced on land-based gambling (see question 15) apply to remote gambling.

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Yes, the general rules applicable to patent protection also apply to gambling games in Brazil. In this sense, it is important to bear in mind that patent protection in Brazil is only obtained and assured by registering it with the Brazilian Patent and Trademark Office (BPTO), meaning that if an invention is not protected by means of a patent, in principle, anyone is able to freely use it.

Note, however, that Brazilian law prohibits registration of logos that identify gambling activities. In this context, if the registration request submitted to the BPTO classifies the logo as gambling-related, said public authority will refuse the registration request on the grounds that the activity related to the logo is prohibited in Brazil, regardless of whether the logo is already registered in another jurisdiction.

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Brazilian law authorises the promotion of lotteries under certain limitations. Regarding the use of brands and logos, the use of the expressions ‘Federal Lottery’, ‘Federal Lottery of Brazil’, ‘National Lottery’ and other similar expressions can only be used by the Federal Savings Bank, the Federal Lottery Administration Service and the Board of the Federal Savings Bank for the promotion of the Federal Lotteries. An exception is made for entities authorised to distribute prizes, and these are only authorised to use them on prize draw announcements or promotion of the lottery drawing results.

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As a general rule, advertising in Brazil is regulated by the Brazilian Self-Regulation Advertising Council (CONAR). According to CONAR, advertisements that may induce, favour, commend or stimulate criminal or illegal activities are prohibited.

Lotteries

While advertising of gambling games is prohibited in Brazil, there are certain restrictions applicable to lotteries. In addition to the limitations on the use of the ‘Federal Lottery’ brand (see question 23), advertisement of the Federal Lotteries is attributed exclusively to the Federal Savings Bank, the Federal Lottery Administration Service and the Board of the Federal Savings Bank.

Moreover, Brazilian law also establishes that the promotion of lottery announcements, notices or drawings in locations where the relevant tickets are not authorised to circulate is considered a criminal contravention and, therefore, is subject to penalties and fines (see question 4).

Horse races

Every horse race is bound to the rules provided in Decree No. 96,993 of 1988, the National Race Code and the General Bet Plan of each authorised racecourse, approved by the CCCCN.

Such laws and regulations are limited in providing general advertisement guidelines on the authorised racecourses’ betting system, such as:

• the General Bet Plan of each authorised racecourse must be affixed in locations accessible to the public within the racecourse premises; and
• the General Bet Plan must establish the different betting modalities available in a manner that the gambler can be perfectly aware of the betting procedures, calculations, apportionments, percentage of withdrawals and other peculiarities of the betting system adopted by the racecourse.

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Not applicable.

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No licensing, registration or other process is required for suppliers given that gambling is prohibited under Brazilian law.

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Not applicable.

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Not applicable.

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Not applicable.

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Not applicable.

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Not applicable.

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There is no specific regulation for ‘quasi-gambling’ in Brazil. In any case, the Law of Misdemeanours must be observed and any breach of it may cause ‘quasi-gambling’ to be treated as gambling.

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Not applicable.

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Not applicable.

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The particular approach to gambling in Brazil has reflected on related litigation in the jurisdiction. Naturally, the restriction of the major gambling activities to state-owned entities (SOEs) has resulted in all the major disputes involving the federal and state branches of the government and focusing mainly on issues of public law.

The major cases that bear some relation to the gambling industry are those involving service providers retained by SOEs and that address issues concerning compliance with public procurement law, as well as performance of the corresponding contracts entered into with the SOEs. Such contracts are governed by a specific set of rules forming a complex legal framework, which are the source of relevant discussions.

Also, there are important disputes related to the tax regime over lottery-related services. Such disputes involve SOEs, service providers and different entities of the Federation, addressing specially ICMS Tax and its impact on the price structure of the contracts entered into between SOEs and its service providers.

Finally, in terms of international litigation, it is worth mentioning that the Brazilian Supreme Court, through different precedents, traditionally considered that foreign decisions (judgments or arbitral awards) on gambling-related debts could not be enforced in Brazil. The rationale was that such decisions would be contrary to Brazilian public policy. However, after the authority to ratify foreign decisions in Brazil shifted from the Supreme Court to the Superior Court of Justice, the prevailing view also shifted. The Superior Court of Justice indicated that it will favour a view that is more aligned with the international concept of public policy. The Court has already ruled that decisions ordering collection of gambling-related debts are, in principle, enforceable in Brazil, as long as gambling is legal in the place where the debt was constituted. In addition, the Court has authorised that defendants located in Brazil receive service of process from lawsuits filed abroad seeking collection of gambling-related debts.

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After several years of discussion, the Brazilian Congress is now taking the final steps to allow the commercial exploitation of gambling and gaming in Brazil. There are two bills currently in their final stages of approval by the Senate and the House of Representatives, including guidelines for regulation, monitoring and sanctions for violations related to this matter. The government also launched the LOTEX concession, with the bidding notice published on 5 April 2018.

Bills of Laws

In the Senate, Bill No. 186/2014 establishes the regulation of gambling and gaming in all national territory. According to its wording, licences to commercially explore gambling and gaming activities will be granted by the federal government, most specifically by the Brazilian Federal Savings Bank, upon a bidding process. Granting of licences may also happen by concession, but only for the public sector.

As per the Senate’s bill, the main goal is to develop certain under-developed areas of the country, most specifically the north, northeast and central-west regions, creating new jobs and evolving the local economies with the presence of casinos and bingo (for example). In this sense, companies willing to commercially explore gambling or gaming activities in Brazil must be legal entities duly incorporated according to Brazilian laws, be headquartered and have their management offices located in Brazil, and be duly registered (special registration) with the Brazilian Federal Revenue.

In the House of Representatives, Bill No. 442/1991 intends to become the ‘Gambling Regulatory Benchmark’ and also presents itself as a means for developing the country, creating new jobs and increasing government income with taxes.

The rapporteur congressman argues that some important matters regarding the Gambling Regulatory Benchmark still have to be carefully analysed, such as the requirements to allow the entry of great international casino groups in the Brazilian market. Some other regulations are also still under discussion; for example, the requirement that casinos could only be established in hotels with at least a certain number of rooms.

The Gambling Regulatory Benchmark is currently under review by one specific special commission in the House of Representatives, and there have been several meetings, public hearings and discussions with various authorities since its first presentation. As informed by a congressman who takes part in the special commission, currently, 99 per cent of the participants approve the content of the bill as it is today. Consequently, we expect that the effective approval of the bill may occur soon.

LOTEX

The Exclusive Instantaneous Lottery (LOTEX) (popularly known as ‘raspadinha’), is a type of lottery where bettors know after scratching the betting card whether they have won a prize or not.

The LOTEX bidding documents were published on 5 April 2018 and an auction is expected to take place later in 2018. The bodies involved in the concession process are the Ministry of Finance, the granting power responsible for regulating the sector, and the Brazil Development Bank, which is responsible for preparing the studies and executing the bidding process for the concession. The concession period was defined by the Ministry of Finance as 15 years and the studies elaborated by the Brazil Development Bank defined a minimum grant value of 542.1 million reais (see www.avancarparcerias.gov.br).

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