The route to a succesful regulatory framework in Brazil

Bet Entertainment chief operating officer Alberto Alfieri sets out what he believes will ensure a thriving regulated market in Brazil, and offers a surprising defence of turnover taxes, ahead of next month’s Brazilian Gaming Congress.

With its Bet.pt brand among the leading sports betting operators in Portugal, Bet Entertainment is setting its sights on the Latin American market with its new offering Vivagol.

However the region’s largest market Brazil is only just beginning work on developing a regulatory framework for sports betting. Bet Entertainment’s chief operating officer Alberto Alfieri says that for this to be a success, there are a number of key considerations for lawmakers to address.

From your point of view, what will be the most crucial elements of a successful regulatory regime for sports betting in Brazil? There are a number of elements that must be considered to avoid mistakes, and to ensure Brazilian regulation does not fail.

• An open number of licences. We saw what happened in Argentina [where Buenos Aires province has restricted the market to seven licences] and we know what will happen next.
  
  A limited number of licences would definitely aid unlicensed operators and allow a few ‘sharks’ to eat up market share, creating an unfair standard of competition.
   
• A multi-vertical market. Brazil has waited too long to regulate just one vertical. A satisfactory range of products and verticals, such as casino, virtual sports and fantasy sports, would help build a thriving regulated market, and wouldn’t give unlicensed operators an advantage over legal competitors.
   
• Discard the monopoly model. For any vertical, in any country in the world, the monopoly model just doesn’t help. It doesn’t help the credibility of a business, it doesn’t allow for fair competition, and it doesn’t aid the natural evolution of the industry.
  
  Take the privatisation of [Brazilian national lottery operator] Lotex as an example; it has been attempted seven times, but has still not been finalised, and that’s because the starting point was wrong.
   
• Proper payments regulation. It is currently very difficult for online operators that want to offer viable payment options to customers to do so. They should automatically be able to partner financial institutions once licensed.
   
• Clear lines of communication. It is of paramount importance that fluid and continuous communication channels between operators and regulators are established. It’s a new market, and the regulator is new to gambling regulation. We all need to collaborate to make this a success.
   
• Proper responsible gambling policies. Again, it is very important that operators can share their experiences with the regulator and that a central system for managing responsible gambling is established.
  
  I am talking about a government-maintained self-exclusion register, for instance, and also a responsible gambling committee comprising government and operator representatives.
  
  Self-exclusion by vertical should also be offered, allowing the player to choose which genre of game they are blocked from playing. 
  
  Workshops on the matter should be held, involving key officials both from the operator and regulatory sides. TV and Media campaigns to promote awareness of responsible gambling, with the support of the Regulator, should also be run.

What can the Brazilian government learn from Portugal’s experience of regulating igaming? What elements of Portuguese regulation should be imitated, and what needs to be different? Portugal was definitely a different example compared to many other European regulated markets.

Like few, Portugal went for a turnover tax on sport betting, for instance. Many may think that this is not the best approach, because from a business perspective, most of the revenues go on taxes.

Now, the Portuguese model it not perfect, due to the incremental tax rate, which ranges from 8% on turnover up to €30m, then 16% for turnover over €30m.

But the turnover tax allowed the regulator to control the industry and made sure that the igaming offerings did not exceed consumer demand. If we take the examples of Sweden and the UK, it seems clear that the extremely low gross gaming revenue tax model created an environment that damaged both customers and the industry.

When there are too many operators are in a market, when there is too much advertising on TV at any hour of the day, when the regulations allow and effectively invites hundreds of operators to aggressively compete, the victims are the players and the general public. As a consequence, the whole industry suffers. This, I would say, could be the biggest point to take from Portuguese regulation.

What jurisdictions do you think provide the best example for Brazilian regulations to follow? As I say, I believe that Portugal offers some good examples. France is another. Despite all the criticism for the regulations being too strict and barriers to entry too high, it actually grew while keeping a high rate of taxation, so that they can now afford to lower it.

In general I would say regulatory frameworks that do not exclude certain segments of the industry should be look at. For example, markets that legalise all verticals, rather than only regulating sports betting or only allowing casino gambling in land-based facilities.

Do feel an independent Brazilian operator association is necessary? I see operator associations as a must in any regulated markets.

Once again, I can bring up Portugal as an example. The APAJO (Associação Portuguesa de Apostas e Jogos Online), was established to create a communication channel between the regulator and also among key industry stakeholders. I am sure that, given the shared language and the fact that Portugal is considered still a new market, APAJO would be honoured to work with Brazilian regulators and collaborate as much as required.

In general, we can see that the industry grew wherever the regulators did a good job in keeping an open door policy with operators. Malta and Colombia, for instance, have regulators that value the collaboration with the operators in their jurisdictions.

Alberto Alfieri will be speaking on the panel session Building transparency: how to construct a regulatory body which allows for cross-industry dialogue at this year’s Brazilian Gaming Congress, which takes place at the Hotel Tivoli Mojfarrej in Sao Paulo from June 23 to 25.