Regulation to bring major benefits to Brazil

JOSÉ FRANCISCO MANSSUR,

Secretary of Brazil’s Ministry of Finance, tells SBC Leaders that regulating sports betting will bring many benefits for the market and the country’s sports clubs.

Words by ISADORA MARCANTE

Brazilian President Luiz Inácio Lula da Silva signed at the end of July the Provisional Measure that will regulate the land-based and online sports betting sector in the country. The measure, which was sent to the National Congress, was also subject to the evaluation and approval of the Ministries of Finance, Justice, and Sports.

Ahead of Lula’s signature, we spoke to Manssur, who clarified some of the things included in the Provisional Measure and the future steps towards a regulated industry in Brazil.

SBC: IT’S A PLEASURE TO TALK TO YOU, THANK YOU FOR DISCUSSING THE REGULATION WITH SBC. JOSÉ, WHAT IS EFFECTIVELY CONTEMPLATED IN THE PROVISIONAL MEASURE THAT REGULATES SPORTS BETTING?

JFM: It’s my pleasure. It’s important to contextualise that Law 3.756/18 introduced legal provisions for sports betting, betting on sports results, or, technically speaking, fixed-odds betting. The law gave the Federal Government a deadline to come up with a regulation, and this deadline was not met. It was a two-year period, extended for an extra two, which was not fulfilled. The new Government had the task to fill this gap through a Provisional Measure.

The Provisional Measure gives us a series of tools to be able to effectively regulate all matters related to sports betting through ordinances. The Provisional Measure deals with the broad outlines of taxation, and sanctions for companies not authorised in Brazil. It also sets out that licensing will cost - companies will need to pay a certain amount of money to operate in Brazil. These issues must be, by law, included in the Provisional Measure. After this comes out, while it’s being discussed in Congress, we will edit specific ordinances.

The ordinances will address which documents and requirements are necessary for a company to start operating in Brazil, and the value of the licence, among other things. We will try to have a specific ordinance for what measures the

Government will take with sports entities regarding the manipulation of results.

We will have an ordinance, for example, on responsible gaming measures: how will advertising work within what the Government can regulate? Will there be time restrictions? Will there be information in the advertising content advising people to gamble responsibly? We will determine measures to avoid problem gambling and then we will be able to assist people who have this problem. There will be a series of ordinances.

The Provisional Measure is a tool that authorises the Government to effectively regulate sports betting in ordinances.

SBC: WHAT’S THE GOVERNMENT’S PLAN AROUND SPONSORSHIPS AND ASSISTING PROBLEM GAMBLERS?

JFM: You’re addressing two essential topics in your question. About the first point: people who are aware of the current context of Brazilian sports, like me, who have been working around that for a long time, can’t ignore the relevance and importance that sponsorships from bookmakers have for clubs in all modalities.

When we talk about the most diverse sports in Brazil, we’re highlighting football, but there are also Olympic sports and others, which are very different from football.

Our idea here is by no means to cause irreparable damage that drives sponsors away from clubs. We want to regulate the activity. Many operators and sponsors approached us when we took over to ratify their interest in being regulated. So that’s the main point.

No one came here and said they didn’t want sports betting to be regulated, but no one said ‘we don’t want to pay taxes’. This needs to be said.

People discuss [things], which is very natural and represents the daily life of the Ministry of Finance. ‘This value could be a little lower’, and ‘this one would be like this’, there are many things in these discussions that make sense to us and we accept them. What is not in the interest of the community and the population, we, as the Government, have to defend and explain the reasons why we don’t accept them.

But we consider sponsorships from sports betting companies essential for developing sports, football, and other modalities. It’s not in our interest to cause any obstacles.

Many companies don’t operate in Brazil because they don’t operate in unregulated markets. Once the regulation is in place, new companies will enter. Then the competition around sponsorships and the number of companies offering sponsorships will increase.

We hope that, as a market rule, this will create an effect in which these sponsorships are subject to a more favourable negotiation for those who see the benefits since this also helps sports. We know how important sponsorships are for sports.

Neither the Ministry of Finance, nor the other ministries with which we interact, have taken steps to restrict the possibility of clubs getting sponsorships. No way. We saw England restricting sponsorships on the front of football jerseys. We don’t intend to do that in Brazil. We understand that sponsorships are a fundamental part of revenues, but that they will be solid if there is a strong and safe market in place, with predictability. A strong, safe, and predictable market is a regulated market.

It is very clear to us that regulation will only solidify the market, making it more predictable and it will increase the interest of these companies in advertising.

The biggest challenge that the Ministry of Finance has is finding data because it is an unregulated activity and the sites are abroad. As much as they are companies created in Brazil, the IPs are abroad. It is very difficult to obtain billing data. And a piece of data that has come up several times at the Ministry of Finance, and which I believe is important to be taken into account, is the high amount that operators spend on advertising. It makes us think that it’s very important to advertise to reach the public.

Currently, if you check the schedule of sports channels and sports events, along with the internet and even social networks, there is an absurd volume of betting advertising. It means that it’s a product that the market understands that needs to reach the final consumer. It’s not something you do automatically, therefore there’s a lot spent on advertising.

Our idea here, moving on to the second part of the question, is to create rules so that it’s not a wild environment as it is today: advertising at any time, without limitations.

We have already talked to CONAR - the National Advertising Self-Regulation Council - to find out what the advertising market will bring us and what entities that work with problem gambling or diseases related to addiction can contribute to coming up with regulated, conscious and responsible advertising that encourages people to bet safely.

There will not be a pure and straightforward restriction. We will work to publicise it. We will not take this option away from the advertising market and clubs, but the Government’s role is to find a way to promote responsible advertising.

SBC: THAT LEADS ME TO MY NEXT QUESTION, WHAT MECHANISMS DO YOU PLAN TO PUT IN PLACE TO FIGHT FRAUD, MATCH FIXING, AND MONEY LAUNDERING? WE KNOW THAT OPERATORS HAVE ANTIFRAUD AND PAYMENT DEPARTMENTS TO CONTROL THESE THINGS, HOW WILL THIS BE DONE IN BRAZIL?

JFM: What we are going to do, based on the regulation, is to involve the Central Bank, the Ministry of Justice, and the responsible entities for overseeing money laundering in a joint effort with the Ministry of Finance, so that we create mechanisms to prevent money laundering.

In regards to match fixing, we intend to [include] in the ordinances the creation of a working group involving the Ministry of Justice, the Ministry of Sports - which is a fundamental entity -, the Ministry of Finance, the Central Bank - to control financial movement -, and the police. And most importantly, the sports administration entities, the ones linked to the Brazilian Olympic Committee (COB), the Brazilian Football Confederation (CBF), the clubs, the Order of Attorneys of Brazil (OAB), and other entities to discuss the most modern tools to fight manipulation.

We will try to bring our ordinances and, eventually, bring the systems that will be the most effective. We’ll do this in a joint effort with these entities because their participation is essential. In particular, sports entities are important as they have regulatory mechanisms, disciplinary measures, and expertise. Many of them, like the CBF, already have anti-manipulation systems in place.

In this way, the Government wants to contribute to joint efforts so that the manipulation is fought with the most effective mechanisms.

SBC: DOES THE PROVISIONAL MEASURE SPECIFICALLY INCLUDE BETTING AND CASINOS, BOTH LAND-BASED AND ONLINE?

JFM: The Provisional Measure includes betting on the results of sports events regulated by administrative entities, confederations, and federations, either physically or online.

Casinos and gambling are not included at the moment, as these are activities that are not allowed in Brazil. There’s a project in the National Congress that discusses this topic, and it’s up to the authorities to decide.

However, currently, we have to work with this legislation, which only allows us to regulate betting on sports results. Football, volleyball, basketball, all sports. Nothing more than that.

It also doesn’t include bets related to TV and entertainment shows. We’re not regulating that, we’re regulating betting on sports results.

SBC: THE CBF WITHDREW FROM THE PROCESS AND THE CLUBS DEMANDED A MUCH HIGHER PERCENTAGE OF TAX REVENUE. CAN YOU SHARE YOUR THOUGHTS ON THAT?

JFM: Concerning the claims of the clubs and the CBF itself, as I have been telling them, there is the other end of receiving amounts related to sponsorships. All we are doing here is to make the follow-up economically possible.

We’ll try to come up with a number that represents the health of this market and we’ll also try to get the market to maintain a retention percentage close to 87%, similar to the UK’s.

We want the market to be healthy and regulated and to bring in new companies, which currently don’t operate because it’s not regulated. We want to increase the possibilities of sponsoring. So we have been trying to sensitise the clubs around this topic.

We do need to take into account the Government’s interests around Health, Education, Food, and Security, and serving the most vulnerable. So we have to collect [taxes], it’s not fair that the market moves billions and doesn’t generate anything for the taxpayer and the citizens.

SBC: HOW WILL YOU CONTROL COMPANIES THAT DON’T OBTAIN A LICENCE?

JFM: Many companies will continue to operate in the unregulated market, which will become illegal. There will be hard supervision.

What we want is for companies to feel that being licensed in Brazil is financially viable, based on a concept, which should belong to all of us, of acting within the law.

We must supervise those who are not within the legal market, so as not to harm those who act legally and so that operators continue to generate jobs in Brazil. Licensed operators will have to generate jobs and taxes in Brazil, in addition to sponsoring our sport and helping in the development of Brazilian sport.