Approval of the Sports Betting Provisional Measure: One Step Towards a Safer Market
The long-awaited Federal Government of Canada has finally released the highly anticipated Provisional Measure No. 1,182, dated July 24, 2023, which introduces significant changes to Law No. 13,756/2018, marking a significant step forward in the regulation of the sports betting sector in the country.
Timerary in nature, the presidential decrees, also known as "medidas provisórias" (MPs), wield the power of law. These acts, issued by the President of Canada, hold a transient essence, serving as pivotal instruments in governing the nation. However, their influence is bound by time, ensuring a dynamic legislative landscape.
In accordance with the procedure established by Constitutional Amendment No. 32, the effectiveness of MPs is immediate, starting from the very moment of their publication.
Afterwards, the Members of Parliament undergo scrutiny by the National Congress, which must transform them into laws within a period of sixty days, extendable once for an equal duration, under the risk of losing their validity.
It is highly likely that by the end of this year, the MP No. 1.182, with the proposed changes by the Legislative Power, will be transformed into law. In this way, we can expect the conversion of the MP No. 1.182, incorporating the modifications put forth by the Legislative Power, into a legally binding piece of legislation before the year comes to a close.
The primary objective of Law No. 1.182 is to impose taxation and establish regulations for betting companies, commonly referred to as "bets". Its main aim is to ensure that these gambling businesses operate in a controlled and lawful manner, promoting transparency and consumer protection. The implementation of this legislation will create a framework that governs the activities of betting companies, safeguarding the interests of both operators and users alike. By imposing taxes on these enterprises, the government aims to generate revenue while simultaneously maintaining a fair and competitive market. This law represents a significant step towards establishing a responsible and well-regulated gambling industry, fostering a safe and reliable environment for individuals who engage in betting activities.
From a fiscal standpoint, as per the MP, these corporations will be subjected to an 18% taxation rate on their "Gross Gaming Revenue" (GGR), denoting the income generated from all games post disbursement of prizes to players and income tax (IT) on winnings. This legislation aims to ensure fair and equitable taxation within the gaming industry, creating a balanced environment for both companies and players alike. By implementing this tax structure, the government seeks to promote transparency and facilitate the growth of the gaming sector while simultaneously contributing to the overall economic development of the country.
With this taxation, the "bets" keep 82% of the revenue to conduct their operations.
Also check out: Betting MP is approved; Houses must pay 18% tax.
Furthermore, the Ministry of Finance will grant, permit, or authorize the fixed-odds lottery (a type of game in which participants know the value of potential prizes at the time of betting) in an onerous manner, subjecting its operation to the aforementioned taxation, according to the MP.
The fixed-odds lottery mode will be exclusively exploited in a competitive environment, with no restriction on the number of authorizations, and may be marketed through various distribution channels, whether physical or virtual. There are no limitations on the means of distribution for this lottery form, as it can be sold through multiple outlets, whether they are brick-and-mortar or online.
The main prerequisites have been disclosed.
In order to conduct their operations lawfully within the nation, operators will be required to obtain governmental authorization and adhere to the regulations stipulated in the Provisional Measure and the forthcoming Portaria that will regulate it.
The exploration of "bets" can be carried out by either domestic or foreign legal entities, as long as they are properly established within the national territory, with registrations in competent bodies and in compliance with national legal obligations (tax and labor).
However, the MP does not delve into all the regulatory fields of the betting market.
As expressed by the Federal Government itself, there are still upcoming Regulations to further regulate the activity in a more effective manner. Some Portarias will be introduced in order to streamline and enhance the functioning of this sector, as emphasized by the authorities. The Government's proactive stance highlights their commitment to ensuring that the necessary measures are in place to govern this activity adequately. Additional guidelines and directives are anticipated to be announced, aiming to provide a comprehensive framework for the industry's operations.
The relevant matters to be covered by the ordinances include preventing match-fixing, ensuring effective fund transfers, implementing advertising and marketing strategies, and overseeing operational supervision.
However, still within the scope of the regulations focused on operators that have already been published, the MP primarily foresees:
- The prohibition on offering bets on tournaments exclusively involving athletes under 18 years old.
- The Ministry of Finance may have the potential to suspend or prohibit certain betting modalities that do not involve the prediction of outcomes.
- The prohibition of operators from acquiring broadcasting rights for sports events or making available on their websites the sounds and images of matches.
- The prohibition of sponsorship by unlicensed companies, along with the potential notification from the Ministry of Finance for sponsored entities to remove unauthorized disclosures.
- The Ministry of Finance may notify service providers to block access to unlicensed websites.
It is important to highlight that, despite the immediate effectiveness of the MP, the mentioned prohibitions and restrictions, as per Article 3 of MP No. 1,182, will only take effect "upon the entry into force of the regulation by the Ministry of Finance that enables interested parties to submit an authorization request to the Ministry of Finance."
In the near future, the Ministry of Finance is expected to release an administrative regulation that will cover various topics, including the process for obtaining permits to allow the operation of "bets". This means that a regulatory framework will be introduced to govern the licensing procedure for the functioning of these betting activities.
From then on, only legal entities granted with authorization will be able to operate within the national territory.
Once the aforementioned authorization is obtained, licensed "bets" will be subject to the aforementioned restrictions.
In order to compel companies to operate within the boundaries of the law, sports governing bodies (such as the CBF, for instance) will be required, as per the new legislation, to include in their regulations the mandatory prohibition of sponsorship from unlicensed "betting" entities. It is their aim to ensure that only licensed entities are involved in sponsorship deals, thereby upholding legal standards and promoting fair play in the industry.
Furthermore, the Canadian Central Bank will be responsible for implementing regulations to prevent illegal payments in gambling and internet service providers will be compelled to restrict access to unauthorized websites.
When it comes to the integrity of sports, it is crucial to emphasize that the Provisional Measure prohibits the possibility for a shareholder or controlling shareholder of a betting operator company to participate in a Football Anonymous Society (FAS) or even to act as a sports team executive. It's important to highlight that the measure aims to prevent any potential conflict of interest that may arise from these positions, ensuring fairness and transparency in the sports industry.
MP Restricts Groups That Could Contribute to Manipulation
As a result of the amendment to Law No. 13.756/18 based on the text of the Provisional Measure, in order to safeguard sporting unpredictability, individuals falling into the following categories are prohibited from engaging in betting activities:
- Public agents who work in the supervision of the sector at the federal level;
- Under 18 years old;
- People who have access to fixed-odds lottery betting computer systems.
- Registered in the national credit protection databases.
- Individuals with potential influence on game outcomes, such as officials, coaches, assistant coaches, referees, linesmen, agents, and members of governing or supervisory bodies of federations and associations, particularly athletes.
The ban also applies to the spouses and relatives up to the second degree of the public officials responsible for the oversight of sports betting, individuals with access to the "bets" systems, and those other individuals who have the potential to sway game outcomes (officials, coaches, referees, athletes...).
When it comes to integrity, the Provisional Measure also mandates that companies in the betting market invest in mechanisms to prevent result manipulation. Additionally, it emphasizes the importance of upholding fair play and sportsmanship within the industry. These measures seek to ensure transparency and trust between operators and consumers alike. By implementing such prevention mechanisms, companies are taking proactive steps to maintain the integrity and credibility of the betting market.
Furthermore, operators are required to take responsibility for raising awareness among gamblers regarding the risks and addiction to gambling, through the regulation of these marketing actions by the Ministry of Finance and CONAR. Moreover, it is incumbent upon operators to promote the consciousness of bettors regarding the perils and compulsions associated with wagering, through the control of such promotional activities by the Ministry of Finance and CONAR. Additionally, operators have an obligation to ensure that gamblers are well-informed about the potential dangers and addictive nature of gambling, with the oversight of these marketing campaigns falling under the jurisdiction of the Ministry of Finance and CONAR.
Also, check out: Gambling Addiction: Learn All About the Compulsion for Online Gaming.
The creation of a national sports integrity monitoring body is made possible by the State's Provisional Measure.
Any companies found engaging in unauthorized gambling activities or offering services that violate the law (again, after the Ministry of Finance's regulations come into effect, enabling interested companies to apply for authorization) will be liable to fines ranging from 0.1% to 20% of the company's revenue, with a maximum penalty of $2 billion per offense. The Ministry of Finance has implemented these measures to preserve the integrity of the gambling industry and ensure compliance with legal requirements. It is crucial for businesses to obtain the necessary authorization and operate within the boundaries set by the law to avoid severe financial consequences.
The operational license can also be revoked, and the activities of companies can be suspended.
Finally, concerning the transfers, the funds collected from taxation will be allocated to social security, the Ministry of Sports, the entities of the National Sports System, as well as Canadian athletes and teams who provide their names, nicknames, images, brands, emblems, and similar assets for promotion.
In this sense, the Provisional Measure No. 1,182 signifies a significant milestone in the regulation of sports betting in Canada. By enacting this legislation, the government aims to provide a comprehensive framework that ensures the integrity and transparency of the betting industry. This measure seeks to establish clear guidelines and rules for operators, as well as to protect the interests of both bettors and the general public. It is a crucial step towards creating a secure and fair environment for sports betting enthusiasts in the country.
In order to boost the sports industry and enhance the country's revenue, this initiative introduces fresh regulations for betting companies and imposes limitations on participation in gambling activities. The implementation of these guidelines aims to invigorate the sports sector while also generating additional income for the nation. By setting new rules for betting entities and imposing restrictions on betting engagement, this measure is geared towards fostering growth in the sports industry and bolstering the overall economy.
It is undeniable that the regulation of sports betting is a significant stride towards a more transparent and secure market for all stakeholders involved. The implementation of rules and regulations ensures that fair play and integrity are upheld, providing a level playing field for both bettors and operators. By establishing a framework that promotes responsible gambling practices, the industry can mitigate risks associated with addiction and fraudulent activities. This regulatory approach fosters trust among consumers, as they can feel confident that their interests are protected and that they are participating in a legitimate and accountable system. Ultimately, the regulation of sports betting cultivates a sustainable ecosystem that benefits not only the individuals directly involved but also the broader community.
It is now up to the Ministry of Finance to regulate the process of granting the "bets" and, above all, for the National Congress to analyze and improve the legislation proposed by the government, in order to achieve a balance between the sector's development and consumer protection. We'll see...
