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Gambling regulation is providing several essential debates for the national iGaming industry. Many games and modalities – such as sports trade – are being guided in the following way: “Does this qualify as a gambling game?”.

The founder and CEO of the company responsible for the apppost application, Juliano Fontes, signed an article about the sports trade and the existing doubts about this activity.

In it, Juliano traces a history of the evolution of betting games in Brazil and explains whether the sports trade is, or not, part of this industry.

Check out the full article on sports trade betting

A request to urgently vote on the replacement for bill 442/1991, which deals with the regularization of what is conventionally called games of chance, entered the agenda of the plenary of the Chamber of Deputies. The issue has always been shrouded in controversy because all types of sports are placed under this umbrella, from lotteries, casinos, game of animals, bingo and sports betting, which includes horse racing.

The confusion started a long time ago. More precisely on April 30, 1946, by force of decree-law 9,215, signed by President Eurico Gaspar Dutra, which made all games of chance illegal. From the popular animal game to the sophisticated casinos, which, like what happens to this day in Las Vegas, had an intense cultural activity parallel to gambling. The Cassino da Urca building, in Rio de Janeiro, is still standing today for those who are curious.

The argument was that games of chance went against “morals and good manners”. Games of chance are those that depend on a random factor to determine the winners, which makes the chance of winning very small. Theoretically, the measure would prevent people from being exploited or financially ruined by gambling addiction.

It turns out that the virtue argument was never very convincing for a simple matter: lotteries never stopped working in Brazil. Appeared here in the 18th century, in the city of Ouro Preto, they were not only always legal but operated by private companies chosen in public competition. Until 1961, when Caixa Econômica Federal started to manage all of them.

In 1969, President Costa e Silva created by decree the sports lottery, which would only enter into operation the following year. People could bet on the winners (or a tie) of 13 games in each weekly contest. It was very popular until the appearance of the Lotto and after the Mega Sena. Renamed in 2002 as Loteca, it now has 14 games.

Football fans and fans used to brag and use the number of hits on a particular wheel as proof of their knowledge of teams and championships. The probability of winning varies according to the amount of doubles and triples chosen in the bet. With the single game, it’s one in 2,391,485 for 14 hits and one in 85,410 for 13 hits.

Another type of sports betting, horse racing, has never been banned in the country, although it has long been limited to regular Jockey Clubs, usually reserved for an elite audience.

The Sports Trade in Brazil

The question that remains is: is every sports betting a game of chance? No!

Who remembers those stories during the World Cup at the London Betting Exchange? It was the British who popularized sports betting — which can range from football to niche sports like badminton or dog racing.

With the popularization of the internet, bookmakers went online, starting with the pioneer Betfair, founded in 2000 and which is now a publicly traded company under the name Flutter Entertainment with a market value of US$22 billion.

Quite simply, I can say that sports trading is the cross between the old lotca and the Stock Exchange. That’s right. Unless you consider investing in stocks to be the same as playing roulette, you can understand that we are talking about different activities.

Stock traders in the financial market do not make bets in the classic sense. The English language even separates into distinct verbs. Playing roulette is gamble, trading on the stock exchange is trading. Because a good stockbroker doesn’t buy or sell stocks based on hunch, sympathy or feeling. They analyze dozens of reports that show a range of company indicators and test them on mathematical models to predict trends based on past market movements.

The sports trader also needs information to choose a strategy. Team retrospectives, results and number of goals scored and conceded as visitors and hosts, performance in a specified number of matches within the championship. Data of this type form trends.

The “bets” are placed against each other. When a system accepts your “hunch” that Flamengo will lose to Atlético-MG, it’s actually betting against you, that is, that Galo won’t win. And you can also bet an amount X on Flamengo and Y on Atlético. Unlike the bookmaker at a poker table, winning bettors are not banned.

These positions made by several different people create a trend, increasing the prize for a certain position (say, the winning Rooster). You can bet on the victorious team, on the loser, on the scoreboard, on expulsions, substitutions… The bettor already knows, when he registers his positions, how much he can earn in the event of a hit by applying a multiplier — the fixed odds — of the stake.

Like an investment house like XP, Rico or Vitreo, the sport trader’s goal is not to rely on luck, but to assemble a strategy to maximize profit. And in the same way that the financial market has consultancies that provide reports providing good investment indications, in the world of sports trading there are applications that help in setting up the strategy, such as appost. It does not place bets, it just provides the data to guide the business, the bet.

Of course I am speaking very simply. There are numerous details that do not fit here for the purpose of this analysis. There are large fluctuations in earning possibilities depending on the strategy adopted. Like on the Stock Exchange.

Sports betting is a consolidated activity that grows at a rate of 11.5% per year. In 2020, the global market was valued at $59.6 billion. The expectation is that it will reach 127.3 billion dollars by 2027. The data are from the consultancy firm Grand View Research.

Here in Brazil, even with all the restrictions still in place, bets moved 7 billion reais last year, despite the pandemic having paralyzed most of the championships, according to a survey by the MKT Esportivo portal.

A proof of the potential of this market is in the teams that disputed the Brasileirão. Among the 40 teams in Series A and B, 33 had their shirts sponsored by bookmakers.

Currently, we are in the following situation: the Brazilian who wants to be a sports trader is not doing anything illegal, but the sites need to be hosted abroad due to lack of regulation.

The approval of Law No. 13,756/2018, in the Michel Temer government, took an important step towards defining how the funds collected with lotteries will be distributed and recognizing the legality of fixed-quote bets, even if it left the regulation under the Ministry of Finance, which has not yet occurred.

In July of this year, Congress corrected the tax collection, which is now through the Gross Gaming Revenue (GGR), the difference between gross revenue and paid prizes, which is another step in the right direction.

The substitute that is under analysis in the Chamber of Deputies authorizes games of chance and includes in Section VII, art 61 (p. 809 of the document) sports bets carried out in licensed physical locations (such as lottery houses today) or on websites with servers in national territory.

This is an opportunity for the country to generate employment, create another source of tax collection and even income for people, in a lawful and data-driven way. The trader may have a more conservative or bolder profile and receive a premium for this under certain circumstances. Bad luck or luck are in another department.

Juliano Fontes is one of the country’s leading sports trade authorities; Founder and CEO of the company responsible for the appost app