The expectation for the launch of sports betting regulation in Brazil started a ‘battle’ between Rio de Janeiro and São Paulo. While the Ministry of Finance is preparing the provisional measure for the betting market, the two main cities are working together to attract players.
São Paulo anticipated and approved the decrease from 5% to 2% – of the ISS (Tax on Services of Any Nature) for entertainment activities in December 2022. Lotteries, sports betting companies, bingos and fantasy sports were included in the measures . Rio moves to approve the same reduction in the coming weeks.
Bill No. 1822/2023 is Councilor Pedro Duarte (NOVO) with the aim of making Rio a more competitive city. In addition to creating new jobs and investments, the establishment of bookmakers in the city would prevent the flight of qualified professionals to São Paulo.
“From an economic point of view, there are several benefits for the city. The first is the collection of the entire operation in Brazil. According to federal legislation, the company will collect taxes (ISS) for the entire operation in Brazil at its headquarters. The second major benefit is job creation. Companies need marketing, technology, customer service… Naturally, a good part of these jobs are generated in the place where the company sets up its headquarters. And the third point is the development of this sports betting ecosystem, which means more sporting events in the city being sponsored, for example”, said Pedro Duarte in an interview with LANCE!.
According to minister Fernando Haddad, the regulation of online sports betting should generate a total collection of between R$ 2 billion and R$ 6 billion.
“Talking about values in this market is very complicated, as there are still many variables. If the federal regulation is bad, the value in dispute will be lower. If it is good, it will be higher”, explained Udo Seckelmann, head of the Web3 & Gaming department at Bichara and Motta office.
If the City Council approves PL Nº 1822/2023, Rio de Janeiro would be equal to São Paulo in terms of taxation. “We’ve already had meetings at City Hall, between players in the betting sector and the Public Power, precisely to take the next steps and become even more competitive. For example, companies pointed out that the workforce is specialized in this field”, said Pedro Duarte.
“The City Hall talks with the actors thinking about models to train professionals specifically for this area. That would be another huge differentiator. And there is also, of course, Rio de Janeiro’s identification with the creative economy, with entertainment and sports. It is a natural vocation of the city, and we are working to show these companies that Rio is ahead of São Paulo in these areas”, he added.
The vision is shared by Chicão Bulhões, municipal secretary of Economic Development, Innovation and Simplification of Rio. “The ISS is the main trump card that municipalities have to attract online sports game companies. But the City Hall, and we at SMDEIS, are working every day to offer a better city for companies: with transportation, qualified labor, in addition to the attractions that Rio already offers. We can only do this with good projects, pursuing results”.
“At the office, for example, we have the Programadores Cariocas project, which should train 5,000 young people by next year. We are also investing in technology and innovation projects. The objective is to leave the transformation of the city of Rio into the technology hub of Latin America as a legacy for the population”, he added to LANCE!
The CEO of Galera.bet, Marcos Sabiá, commented that, before selecting their headquarters in Brazil, bookmakers need to evaluate several factors. “In addition to tax issues, such as ISS and other taxes, the bookmaker must define the headquarters in Brazil taking into account the strategic market”.
“Whether it will be a business with national or regional pretensions, whether it will have the expectation of using talent that already exists in the region, whether there will be ease of technology, supplies and services… The definition of the host city will necessarily go through these discussions. Like any other business, these variables must be considered for the final decision”, he concluded.
Current scenario without sports betting regulation
In 2018, then President Michel Temer authorized the operation of bookmakers in Brazil, as well as a four-year period for the elaboration of sports betting regulations. However, companies continue to operate in Brazil with headquarters abroad and the government is unable to carry out taxation.
According to estimates by the federal government, around 400 companies are in the Brazilian market and that R$ 12 billion will be moved in 2023. Of the 20 clubs in Série A of the Brasileirão, only Cuiabá does not have any type of commercial partnership with companies in the sector .
After meetings between the Ministry of Finance and representatives of the ANJL (National Association of Games and Lotteries) in the last week, the expectation is that the regulation of online sports betting will be announced by the government, possibly in early April, through a provisional measure. The new rules will come into force 90 days after the publication of the MP.