Brazil's Black Market Could Surge if Supreme Court Overturns Betting Law, Warns National Association of Games and Lotteries

The National Association of Games and Lotteries (ANJL) has cautioned that black market activity in Brazil could significantly increase if the Supreme Court invalidates the current law that legalized sports betting. This warning came on Monday, November 11, during a public hearing at Brazil's Federal Supreme Court (STF), which is currently examining the constitutionality of Law No 14,790/2023. This legislation, which regulates sports betting in Brazil, faces scrutiny following a legal challenge from Brazil’s third-largest trade union, the National Confederation of Trade in Goods, Services and Tourism (CNC), which claims the law contradicts the Brazilian Constitution.

The CNC filed an ADI (Ação Direta de Inconstitucionalidade), a legal mechanism to assess laws potentially infringing on constitutional rights. The ADI’s rapporteur, Minister Luis Fux, emphasized that the STF will need to determine the law's constitutionality by mid-2025. Fux suggested that revisions are necessary to mitigate risks for vulnerable bettors, asserting, “The problems that are brought up here, relating to deprived communities, the minor problems and the other serious problems that are highlighted, lead us to the idea that this resolution must be urgent.” Officially, the legal betting market is expected to begin operations on January 1, 2025, with the regulatory authority, SPA, currently processing license applications.

ANJL has highlighted that accepting this ADI could stall up to 60,000 new industry jobs and prevent the anticipated BRL4 billion (approximately £542.3 million/€654.7 million/€695 million) revenue expected in the betting sector's first operational year. ANJL's legal director, Pietro Cardia Lorenzoni, argued that, if accepted, this ADI would contradict its own intent, noting, “If the Direct Action of Unconstitutionality (ADI) is accepted, it ends, contrary to its own objective, doing what it seeks to prohibit or avoid, which is the incentive to pathological gambling, illegal gambling.”

Brazil’s attorney general, Paulo Gonet Branco, also filed an ADI against both Law No 14,790/2023 and the preceding Law No 13,756/2018, which introduced the framework for legal sports betting in Brazil. Branco's ADI argues that these laws lack sufficient safeguards to meet "minimum requirements for preserving constitutional assets,” asserting that they inadequately protect consumer rights and Brazil's economy from what he described as “the predatory nature of the virtual betting market.”

Criticism of the gambling industry has also been vocal from Brazil’s consumer goods sector, which claims that gambling is drawing consumer spending away from traditional markets. According to a widely debated study by the Brazilian Society of Retail and Consumption (SBVC), around 23% of Brazilians who spend part of their income on gambling reportedly have cut back on clothing purchases, while 11% have reduced healthcare and medication expenses.

ANJL, however, refutes claims of significant impact on consumer spending. During the first day of the STF hearing, Lorenzoni clarified that betting accounts for only about 0.23% of Brazil’s GDP, describing its influence on consumer behavior as “insignificant.” He further warned against banning gambling advertisements, pointing out that advertising plays a crucial role in distinguishing regulated operations from illegal ones. “Advertising is one of the essential ways to differentiate regulated from unregulated gambling,” he emphasized.

ANJL attributes the challenges faced by the betting sector to the delay between the initial legalization of betting in 2018 and final legislative approval in December 2023. Lorenzoni argued this delay has contributed to the proliferation of illegal betting sites, stating, “It is precisely this scenario that caused this reality, with the harms we are experiencing [within the betting sector].” Currently, there are around 4,000 active betting sites in Brazil, many of which, according to Lorenzoni, are associated with fraud and economic crimes. However, he stressed that these are not the practices of operators pursuing regulated gambling.

As of November 12, a report by Regulus Partners estimated that the gray betting market in Brazil is now valued at $3.4 billion, largely driven by a surge in digital adoption following the Covid-19 pandemic.

By fLEXI tEAM