Industry Report

BRAZIL BETTING
FOCUS
LATAM’S LARGEST
REGULATED MARKET
IN THE MAKING?
CONTENTS
1. 
INTRODUCTION

2. BRAZIL FOCUS

3. 
BRAZIL INFO

4. LICENSE SYSTEM AND TAXATION DEBAT

5. BENEFITS OF ADOPTING A STRONG REGULATORY FRAMEWORK

6. THE IMPORTANCE OF A STRONGLY REGULATED SCENARIO

7. NEURON 3

8. THE LEADING GAMING AND BETTING PLATFORM PROVIDER FOR LATAM
1.
INTRODUCTION

With a population of 210 million with a clear propensity for gambling

and a huge sporting culture, a lot of international operators are
viewing the Brazilian market as a great opportunity.

Whilst up until now the local regulated sports betting market is

limited to horse racing, the local industry is greatly targeted by grey
market operators. In fact whilst the size of the offshore market is
up for debate, according to a 2017 report from the Brazilian Legal
Gaming Institute (Instituto Jogo Legal) the illegal gambling market
and not just the online, was worth up to $6.4 billion in Gross Gaming
Revenue terms.

All this whilst a report commissioned by the remote Gaming

Association (RGA) and conducted by KPMG in late 2017 estimated
the offshore online grey market to be worth $2.1 billion annually in
GGR terms.

And with the introduction of regulatory frameworks on the horizon,

it is no wonder that many industry experts are sizing the opportunity
of what will be the largest market in the Latin American region and
one of the largest markets on a global scale.
2.
BRAZIL FOCUS
Regulatory aspects aside, Brazil is considered as a very interesting prospect
and is considered to have all the elements in place to project itself as the
largest market in Latin America, and one of the largest on a global scale.

With 211.8 million people, 87% of whom live in an urbanised context, by far
Brazil has the largest population in the region. However it is the passion that
the locals have for sports, with sports betting amounting to 95% of all the local
industry, that really highlights the country’s immense potential.

With 205.8 million, mobile connections penetration stands at 97%, which is

lower than the median for the Southern American region. Internet penetration
(150.4 million) is in line with the average penetration for the region (71% vs 72%),
nonetheless it is important to note the significant 6% year-on-year increase that
was registered from January 2019 to January 2020.

211.8 Largest population

in LatAm region
97.0 Mobile connections
penetration
MLN %
3.
BRAZIL INFO

With an average speed of 24.79 MBPS for mobile internet connections, and
48.75 MBPS for fixed internet connections Brazil has one of the region’s strongest
mobile and fixed internet infrastructures. Most noteworthy is the 17% year-on-
year increase in terms of mobile internet connections, and the 63% year-on-year
Average
increase in terms of fixed internet connections.
Speed

24.79 The country also boasts a strong social media presence for the Latin American
MBPS region, with 140 million active social media users, representing 66% of the
Mobile Internet population. However the social trend in the country is evident with the country
registering an increase of 8.2% (+11 million) in social media user numbers from
April 2019 to January 2020. Mobile is the predominant channel for social media
access, amounting to 99%.

Mobile channel,
140.0 Active social media users,
i.e. 66% of the population
99.0 predominant for social
MLN % media access
3.1
BRAZIL FOCUS
Total Mobile Phone Subscriptions: 205.8 million
population 97% penetration

211.8
-1.6% (JAN 2020 vs JAN 2019)

Internet Users: 150.4 million

MILLION 71% penetration
+6.0% (JAN 2020 vs JAN 2019)

DEVICE OWNERSHIP
Percentage of internet users aged 16 to 64 who own each kind of device

Mobile Mobile Laptop or Tablet

phone devices desktop
38.0
96.0 94.0 73.0 %
% % %
(any type) (smartphone)
3.2
BRAZIL INFO

DEVICE
OWNERSHIP

PERCENTAGE OF
INTERNET USERS
AGED 16 TO 64 WHO
OWN EACH KIND OF
DEVICE

Average daily time that internet users Average daily time spent using
aged 16 to 64 use the internet: the internet on mobile devices:

9H 17M 4H 41M
3.3
BRAZIL INFO
TOTAL NUMBER OF
MOBILE INTERNET MOBILE
USERS INTERNET USE

143.9
MILLION

96% 2.5%
MOBILE INTERNET USERS SHARE OF ALL INTERNET
AS A PERCENTAGE OF TOTAL USERS ACCESSING VIA
INTERNET USERS FEATURE PHONE

95% 90%
SHARE OF ALL INTERNET PERCENTAGE OF MOBILE
USERS ACCESSING VIA CONNECTIONS THAT ARE
SMARTPHONES BROADBAND
3.4
BRAZIL INFO
INTERNET
CONNECTION SPEEDS

AVERAGE SPEED OF MOBILE AVERAGE SPEED OF FIXED

INTERNET CONNECTIONS INTERNET CONNECTIONS

24.79 45.75
MBPS MBPS

+17% +63%
Year-on-year change in Year-on-year change in
average speed of mobile average speed of fixed
internet connections internet connections
3.5
BRAZIL INFO
SHARE OF WEB
TRAFFIC BY DEVICE

Mobile Laptop & Other

Phones Desktop Tablet Devices

31.3% 68.1% 0.5% 0.07%

+31% -9.3% -35% -36%
DEC 2019 DEC 2019 DEC 2019 DEC 2019
vs DEC 2018 vs DEC 2018 vs DEC 2018 vs DEC 2018
3.6
BRAZIL INFO

27% FINANCIAL

4.8% Has a INCLUSION FACTORS

credit card
Has a mobile
money account

Percentage of the population

aged 15+ that reports owning or Brazil
using each financial product or 2020
service:

70%
Has an account

18%
with a financial
institution
Makes online purchases
and/or pays bills online
3.7
BRAZIL INFO

FASHION & BEAUTY

ECOMMERCE SPEND
BY CATEGORY

5. 25
BILLION
ELECTRONICS AND
PHYSICAL MEDIA
4. 15
BILLION
+4.3% 28. 84
BILLION
TRAVEL (INCLUDING
ACCOMMODATION)

+2.2% +8.4%

FOOD AND
PERSONAL CARE
1. 30
BILLION
Total amount spent in
consumer ecommerce 226.0
BILLION DIGITAL MUSIC
categories in 2019, in US
+2.9% +14%
Dollars

FURNITURE AND 1. 99
BILLION
723.0 VIDEO GAMES
APPLIANCES BILLION
+2.5%
2. 60
BILLION
+6.7%

+1.6%
TOYS, DIY & HOBBIES
3.8
BRAZIL INFO

ECOMMERCE
VALUE

$18.0 BILLION +10% 3%

Total value of the Annual growth in B2C Ecommerce
consumer (B2C) the value of B2C spend as a percentage
ecommerce value ecommerce spend of total B2C spend

$331.0 27%
Average annual Mobile share of
online spend per B2C B2C Ecommerce
Consumer transaction value
3.9
BRAZIL INFO

ECOMMERCE PURCHASES
BY PAYMENT METHOD

PERCENTAGE OF ECOMMERCE TRANSACTIONS

COMPLETED USING EACH METHOD OF PAYMENT

4.0%

21%

BANK TRANSFER CASH

4.0%

71%

E-WALLET CREDIT CARD

3.10
BRAZIL INFO

The global regulated betting market is growing rapidly, notably sports betting
online, and according to leading industry data analysts H2 Gambling Capital will
reach US$101bn in gross win by 2024 (see Chart 1). Sports betting will account
for 67% (with racing 33%) of that total.

CHART 1: Global Regulated Betting by Gross Win (US$ bn)

120
That consumer activity is
100 reflected in the Brazilian
80 market and where the lack
60 of licensing will mean that
40 sports betting gross win for
20 offshore operators will reach
0 BRL 169.8m by 2020.
2015 2016 2017 2018p 2019e 2020e 2121e 2022e 2023e 2024e
Source: H2 Gambling Capital, August 2019 Total Betting Sport Betting Racing
3.11
BRAZIL INFO

CHART 2: Brazilian Offshore Online Sports Betting by Gross Win (BRL m)

180
However, within a proper
160
regulatory and taxation
140
120
structure Brazil could see a
100
licensed market equating to
80 upwards of BRL 2,389.2m
60 in gross win by 2024, with
40 sports betting equating to
20 95% of that market.
0
2010 2011 2012 2013 2014 2015 2016 2017 2018p 2019e 2020e
Source: H2 Gambling Capital, August 2019
4.
LICENSE SYSTEM
AND TAXATION DEBAT
OPEN LICENSE VS CONCESSION
BASED SYSTEM

Market experts are hopeful that an open licensing structure will be adopted.
However whilst this seemed to be the case in the first public discussions led
by the Brazilian government, this scenario has changed. In fact the third draft
of the regulation has seen the Brazilian government shift its stance from an
authorisation-based licensed system (open licensing structure where there are
no fixed number of licenses) to a concession based system, which might in itself
include a bidding process.

Luiz Felipe Maia, a lawyer at Brazilian firm FYMSA Advogados, says that a
concession based system, thus limiting the number of licenses, wouldn’t be of
benefit to anyone.

“By limiting the number of licences, we will only be creating excuses for unlicensed
operators to continue operating offshore. Regulation must create the necessary
conditions to attract all operators willing to invest in our country and to comply
with our rules, which will set the highest standards based on international best
practices.”
4.1
LICENSE SYSTEM
AND TAXATION
DEBAT TURNOVER TAX
VS GGR TAX

The Brazilian government looks set to levy a 3% turnover tax on licensed betting operators,
as opposed to the reduced 1% rate put forward in a draft Presidential Decree published in

3.0%
early 2019.

turnover tax on This is due to the 3% rate being included in Law Number 13,756/18, the bill passed in
licensed betting December 2018 that legalised sports betting and created a two-year window for the
operators legislature to develop regulations, with the possibility for this period to be extended
by a further two years.

The Presidential Decree that sets out the regulations governing sports betting cannot
override the law, resulting in the tax rate reverting to the original sum.

The taxation system referred to in the 2018 law has been criticised by various experts as being a
relatively high taxation that could quell the interest for operators to acquire a license. Particularly
vociferous against the tax was the International Betting Integrity Association (IBIA) – a not-for-profit
trade body representing the betting integrity interests of many of the largest licensed retail and online
betting operators in the world.
4.2
LICENSE SYSTEM
AND TAXATION
DEBAT

The IBIA stated that the type and level of taxation significantly influences the size and product availability
of the licensed betting market and is an important driver of market growth, structure and consumer
attraction. The Association further expressed her concern about the proposed turnover taxation
approach proposed in Brazil, which it states goes against global norms.

The IBIA stated that this could have a negative impact in regards to the possibility of achieving a high
channelling rate as a core component of any successful regulatory system. Its assessment of European
countries shows that their approach to taxation directly impacts the rate of consumer activity channelled
to their regulated market.

For example, those in the 10-20% GGR range have ‘high to very high’ levels of channelling of consumers
to their regulated operators (as opposed to offshore operators), with the UK (15% GGR) and Denmark
(20% GGR) estimated to have consumer channelling rates of 95% and 90%.11

Whereas channelling rates for those employing a turnover tax is ‘low to medium’; Poland (12% turnover
tax) is estimated to only have 30% of its consumer activity channelled to its operators and France (9.3%
turnover tax) around 60% channelled to its licensed betting operators.12
4.3
LICENSE SYSTEM
AND TAXATION
DEBAT GGR TAXATION
PER COUNTRY

The IBIA concludes that turnover based markets are unattractive to betting operators and consumers
alike and invariably suffer from low levels of licence applications and related market competition. To
highlight this, in 2016 online gambling licences in the UK numbered over 200, with Spain 51 and Denmark
38 (all have a GGR taxation of 15-20%), whilst France had only 16 licensed operators, with Poland 4 and
Portugal 2 (all employing a turnover taxation of 8-16%).

The Association also notes that South and Central American markets have also adopted GGR taxation
approach, notably: Colombia 15%, Buenos Aires (Argentina) 25% and Mexico 30%. Whilst many of the
state-level markets opening in the United States of America are similarly also adopting a GGR approach
(e.g. Nevada 6.75%, Indiana 9.5%, West Virginia 10%, Mississippi 8-12%, New Jersey 8.5-14.25%).
5.
BENEFITS OF ADOPTING
A STRONG REGULATORY
FRAMEWORK

THE COLOMBIAN
EXAMPLE

In 2016, the country became the first Latin American market to vote through
a bill regulating online casino and betting products, with the government
opening the market to new licensees in July 2017. Since then, Colombia’s
online gaming sector has remained a relatively small part of the overall
gambling market, making up just 9.4 percent of total gaming revenues for
the first half of last year. The population of Colombia is approaching 50
million, but so far only a small proportion have opted to open online gambling
accounts following the liberalisation of the market.
However more interestingly, the evident signs are that the market is gradually
shifting towards remote forms of gambling as the online sector continues to
outpace the growth of other verticals. This is further underlined by Coljuegos’
tax revenues for the year ending 31st October 2019, with online channels
registering steady year-on-year growth.
5.1
BENEFITS OF ADOPTING
A STRONG REGULATORY
FRAMEWORK

Furthermore, according to Colombia’s regulatory body, Coljuegos, average

expenditure per user per annum rose from $20 in 2015 to $94 in 2017. This
figure is expected to triple by 2021.
94.0 average
US$
expenditure
per user per annum in 2017
Retail bookmakers accounted for the bulk of tax revenue, bringing in
COP377.25bn, 61% of the market, a 10.6% increase year-on-year. The
SuperAstro Lottery followed, with a 14% share of the market, accounting for
COP88.72bn of the total tax take, a 15.2% year-on-year increase.
Online operators’ COP65.97bn made up 10% of the market, though the

61.0 Retail
channel's growth was the fastest of any legal form of gambling. Baloto
bookmakers accounted and Revancha lottery games made up 10% and 3% respectively, bringing in
about bulk of tax revenue
% COP59.71bn and COP20.45bn, while their combined growth was 3.3%.
6.
THE IMPORTANCE OF A
STRONGLY REGULATED
SCENARIO

• Tax revenue from online gambling licensees grew 106.3% for the year

163.3 gambling
Tax revenue from online
% licensees
ending 31 October, 2019 to COP65.97bn (£14.7m/€17.6m/$19.6m), with
total collections for gambling across all channels up 15.5% to COP617.21bn.

• Coljuegos also announced that, during last year, 4,332 illegal games had
been withdrawn from the market, a 14.8% increase on 2017-18.

• Until last December the Colombian gambling market was projected to

15.7 year-on-year
%
increase
of Colombian gambling market
reach COP664.83bn, a 15.7% year-on-year increase. Money collected
by Coljuegos is used to fund public healthcare in the country.
7.
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7.1
NEURON3
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