Betting operations were shut down due to lack of documentation and integrity, says the Secretary of Betting.

Of the more than 100 companies that were authorized to operate at the end of 2024, only 66 received authorization to operate in Brazil's regulated betting market. According to Regis Dudena, Secretary of Prizes and Betting at the Ministry of Finance, many betting companies were excluded because they failed to present the required documentation or raised doubts about their legitimacy.

“Some of these companies were not approved because their authorization requests were deficient. For example, out of the 100 required documents, some submitted only 20,” he says in an exclusive interview with EXAME.

Approaching his first year in office, the secretary was emphatic in stating that the government is not obligated to grant operating licenses to any company and that the administration conducts a cautious evaluation.

"If we have sufficient evidence to, for example, have legitimate doubts regarding the conduct of this company, the integrity of this company, or the illegal behavior of this company, we may not grant this authorization based on this provision of the law," he states.

Regarding the challenges for the first year of regulation, Dudena does not give a deadline for all unauthorized betting sites to be shut down and says that a joint effort with financial institutions and the Central Bank is necessary to strangle the illegal operators.

“Taking down domain names will be necessary, but it will have to be complemented. That alone won't be enough to stop illegal companies from operating in Brazil,” he says. “We are trying to identify a way to block the use of PIX (Brazilian instant payment system) for sending money abroad,” the secretary states.

Regarding the projected revenue from taxing gambling and the measures to tighten regulations in response to the increase in gambling among the poorest, the Secretary of Finance states that it is necessary to await data from the sector to understand the size and direction of gambling in Brazil.

“I imagine that, after the first year, we will have enough data to assess the impact of the measures and, if necessary, make changes. We are attentive to correcting restrictions that are not effective or reinforcing rules in areas that need greater control,” he says.

See the full interview with Regis Dudena, Secretary of Prizes and Betting at the Ministry of Finance:

What has changed in practice with the regulated market starting January 1, 2025?

What we call the "regulated market" has truly begun. In practice, the biggest change is that to operate nationally, a company needs to be authorized by the Ministry of Finance. This ensures that the companies providing the service are Brazilian, even if their partners are foreign. They must be based in Brazil, with known directors, and using financial institutions regulated by the Central Bank. Another important point is the rules created in 2024. We regulated topics such as: the system that companies must use; which games can be offered; how the financial operation should be structured; rules to combat money laundering; and rules for the protection of bettors, especially related to mental and financial health. From now on, we know who provides the service and how it is offered. We also have a monitoring and inspection ordinance, as well as another for sanctioning processes, should infractions occur.

What are the penalties for those who disregard the rules?

They start with a warning and, ultimately, can lead to revocation, meaning the loss of authorization. It's not just suspension: they can effectively lose their authorization. Obviously, there has to be proportionality between the conduct and the penalty. If the company did something wrong to the point of warranting revocation, it will lose its authorization and be prohibited from operating in Brazil. If it's something superficial, the first time it receives a warning. But if it's repeated, even if it's minor deviant conduct, it can escalate and lead to revocation. The fine is also another important point. Fines can reach up to R$ 2 billion.

How will the issue of state lotteries and the Loterj case be handled?

A ruling by Minister André Mendonça expressly prohibits Loterj (Rio de Janeiro State Lottery) from providing services outside the state of Rio de Janeiro. This ends the discussion about the possibility of a state lottery operating nationally based on a local authorization. The interpretation of the law and the Brazilian Constitution, which always seemed very clear to us, was confirmed by the Supreme Court. What the STF (Supreme Federal Court) decided is that there is a federal law and a national regulatory body, which is the Secretariat of Prizes and Bets of the Ministry of Finance. Only this body can grant authorizations for national operations. This decision by the STF reinforces that state lotteries can only operate within the limits of their state.

And what about advertising from companies that only have state authorization?

The law makes it clear that advertising for state lotteries is restricted to the state territory. If a company wants to sponsor a club that operates nationally, it needs authorization from the Federal Government. This decision brings legal stability to the sector. Of course, there may still be discussions in the Supreme Court plenary, but this initial position gives us a very solid basis to ensure that the rules are followed and that everyone operates legally within the permitted scope.

Of the more than 100 companies that were cleared to operate at the end of 2024, only 66 were actually authorized. What happens to the nearly 30 companies that did not receive authorization?

For a company to operate until December 31st of last year, during the adaptation period, it necessarily needed to have requested authorization by the publication of the adaptation ordinance on September 17th. In other words, those that requested authorization by August 20th should have received a response by the end of 2024. Those that requested authorization by September 17th could operate during the adaptation period until the end of the year. What is important now is that, starting January 1st, 2025, only authorized companies can operate nationally. This is definitive. If a company requested authorization and had its request denied or remains under review, it cannot operate. Without formally granted authorization, whether definitive or provisional, the company is prohibited from operating. And, if it is identified operating, its website will be taken down.

Will the Secretariat take into consideration the case of a betting house operating illegally while awaiting authorization?

If a company is operating illegally, that is, without authorization, and is in the approval process, it is illegal. This will be taken into consideration. Here's something important, which isn't clear to everyone: the law stipulates that granting authorization is a discretionary act of the Ministry of Finance, taking into account the public interest.

What does this mean?

This means that we are not obligated to grant authorization to anyone. If we have sufficient evidence to, for example, have legitimate doubts regarding the company's conduct, integrity, or illegal behavior, we may not grant authorization based on this legal provision. It is important even for the companies being evaluated to understand this: if a company is operating without authorization and insists on providing the service, this will be taken into consideration. And this could possibly result in them not obtaining authorization due to this behavior.

What were the main reasons why some companies failed to obtain authorization?

Some of these companies were not approved because their authorization requests were deficient. For example, out of the 100 required documents, some submitted only 20. When notified to supplement them, they did not provide the necessary documents, so the processes were archived. In addition, we had a smaller group of companies with integrity issues. This information came from monitoring and inspection areas or from partners such as the Federal Police and the Federal Revenue Service. What we do is not a prejudgment, but a cautious evaluation: if there are legitimate doubts, we prefer not to grant authorization. Finally, there is a group under review because they made significant changes, such as changes in partners or even in their CNPJ (Brazilian tax ID) and name. When this occurs, the process is amended and, in practice, goes back to the end of the queue. These companies still need to wait for the process to be completed before they can operate.

How does the department deal with illegal websites whose domains have been taken down but which may reappear online? Does the government believe that the mechanism they created at the end of last year will be sufficient to prevent these unauthorized sites from continuing to operate?

I would say that taking down domain names will be necessary, but it will have to be complemented. That alone won't be enough to stop illegal companies from operating in Brazil. Firstly, the existence of authorized and legal companies tends to lead bettors to bet with those companies. If I have doubts about whether a company is legitimate or not, and I know that one of them is authorized by the Ministry of Finance, the tendency, on average, is for bettors to prefer those that are authorized. So, that's the first step. The existence of a legalized market is a good start for us to know how to deal with it and for bettors to know where to bet more safely.

And what's the next step?

We will continue this tracking and the takedown of these sites will continue. You are right when you say that there is a possibility of them reappearing with another domain. But this becomes costly for them, because eventually they lose their customer base and the ability to make their brand prevail in the market. Usually, these companies that keep changing domains are more fraudulent than those that want to establish themselves in the market.

And what is the role of the financial system?

Article 21 of Law 14.790 contains a very important provision that prohibits financial institutions and payment institutions from having any relationship with unauthorized betting companies. We are working with the Central Bank on mechanisms to ensure that financial service providers, FIs (financial institutions) and IPs (payment institutions), cease providing services to these unauthorized betting companies.

Is there a plan to block transactions?

We are trying to identify a way to block the use of Pix for sending money abroad. Basically, how it works today: you have companies that operated in Brazil until last year, both reputable and less reputable ones. They used intermediaries who opened accounts in financial or payment institutions and centralized the funds from the transactions. These intermediaries sent the money to a currency exchange bank, which then sent the funds abroad, where the operating company was located. When we identify this flow, it will be possible to block this outflow of funds. The idea here is to have a set of elements. Taking down domain names is relevant, it's important, but it's not enough on its own. It needs other complementary mechanisms.

With the regulations and the list of authorized companies published, does the Treasury have an estimate of when the illegal websites will cease operating? 

I wish I could say that in two weeks we won't have any unauthorized websites operating, but we know it will be a constant challenge. New companies are bound to emerge, and we will need to monitor and supervise them all the time. The Central Bank also needs to act in its area. The trend is that, over time, the economic incentives to operate illegally in the country will decrease more and more.

How does the illegal betting market compare to other markets that operate in Brazil?

It's important to understand that the legalized market creates direct competition with illegal companies. There's a difference compared to other types of illegal markets, such as streaming or cable TV, where the product offered by illegal companies is the same, only cheaper. In the case of betting, the economic incentive to bet with an illegal company isn't as evident. When a bettor bets with an authorized betting site, they have much greater guarantees that their rights will be preserved, that their mental and financial health will be protected, and, most importantly, that they will receive the prize if they win.

With illegal companies, bettors put their finances and mental health at risk and have no guarantee of receiving their winnings. Therefore, we believe that, over time, operating illegally will become less and less viable, both due to regulatory action and market adjustments. But we know this will require continuous monitoring.

Is there a revenue forecast for 2025?

We don't yet have an exact forecast because we don't know the total volume of resources the market will move. Now that we're starting to receive financial data from companies, we'll be able to better estimate annual revenue. We still have a high number of companies with pending authorization requests. Some of them should be authorized at the beginning of this year, which could generate new grants. There's a continuous flow of requests, so revenue will also continue to be generated over time.

With discussions surrounding the rise in gambling among the poorest segments of society, sectors of society and parliamentarians argue that regulations need to be reviewed. How does the secretariat view this issue?

We have always been clear that regulation is something that needs to be monitored. It is not something static, created once and that cannot be modified. What we intend to do now is observe how the market will react to the rules we have implemented and assess whether they are working as planned. We make decisions based on clear reasons and specific tools to mitigate problems identified in the sector. We are confident that we have gotten it right on average, but we know that, eventually, situations may arise that will require adjustments.

The legislature has suggested that banning gambling could be a solution. What is the secretary's position on this?

It's not the role of the secretariat to say that the legislature cannot or should not address the issue. What we can do as regulators is study, monitor, and, if necessary, technically point out what works and what doesn't. Regarding a total ban on betting, our understanding is that an absolute prohibition would simply drive demand to the illegal market. We've seen this happen in other places, and we have a history showing that it doesn't work.

Do you believe we will have enough data this year to understand the sector?

I imagine that, after the first year, we will have enough data to assess the impact of the measures and, if necessary, make changes. We are attentive to correcting restrictions that are not effective or reinforcing rules in areas that need greater control. Regulation needs to be dynamic, keeping pace with the market and responding to its needs in a technical and efficient way. This will only be possible with patience and the use of concrete data to support any future decision.