Brazil's Betting Operators File Lawsuits Over Exclusion from Approved List

Brazil’s Department of Prizes and Betting (SPA) is confronting a series of legal challenges from betting companies after it published a list of approved operators allowed to continue functioning in the country. The list, released in early October, includes 96 companies and a total of 210 associated brands. These operators, having either applied for a federal betting license or already operated in Brazil’s grey market, are authorized to run their businesses between October 1 and December 31, 2024.

However, several operators excluded from the list have taken legal action against the Ministry of Finance, accusing the government of unfairly shutting them out of the market. As of mid-October, eight lawsuits have been filed in federal courts, with some companies arguing that their omission from the list was unjust.

Federal Crackdown Targets Unlicensed Operators

This approved list is part of Brazil's larger effort to regulate its betting market before its official launch on January 1, 2025. The government has also moved to block 2,040 betting websites it considers illegal, including notable names like Betfred and BoyleSports. The National Telecommunications Agency (Anatel) is executing this site-blocking operation, aiming to eliminate unregulated betting platforms from the market.

While the approved list allows licensed operators to continue operations, those who were left off are no longer permitted to offer betting services until they receive proper authorization. This has led to several companies pushing back, with many expressing concern over their exclusion.

Zeroumbet Challenges Exclusion Due to Investigation

Among the companies taking legal action is Zeroumbet, a platform linked to lawyer and influencer Deolane Bezerra. Zeroumbet submitted its application for a federal betting license in August, but the SPA declined to include the company on the list, citing an ongoing investigation into illegal gambling and money laundering. Bezerra herself has been at the center of this investigation, known as Operation Integration, and was arrested in September. However, Zeroumbet’s legal team contends that the investigation targets Bezerra individually and should not affect the company’s operations.

Legal documents presented by Zeroumbet argue, "In this case, the one who would be punished would be Deolane Bezerra and not the company," emphasizing that the business should not face penalties for Bezerra’s personal legal issues. The company seeks court approval to continue its operations despite the unresolved investigation.

In response, the SPA defended its decision to exclude Zeroumbet, stating it was done to protect public interest and bettors, especially while the investigation remains ongoing. Zeroumbet was given five days to respond to the rejection, and the company continues to seek legal recourse.

Esportes da Sorte Secures State License to Stay in Market

While some companies have turned to lawsuits, others, such as Esportes da Sorte, have taken alternative approaches. Although Esportes da Sorte was also excluded from the federal list, the company managed to acquire a license through Loterj, Rio de Janeiro’s state lottery regulator. By purchasing controlling shares in ST Soft, a Loterj-licensed entity, Esportes da Sorte is allowed to continue its operations at the state level, despite being blocked at the federal level.

This strategy has sparked conflict between state and federal authorities. The federal government has raised concerns over the legality of allowing state-licensed operators like Esportes da Sorte to offer services beyond Rio de Janeiro’s borders. The issue has now been taken to the Supreme Federal Court (STF), where the federal government is seeking to halt the nationwide operations of these state-licensed platforms.

Broader Legal and Regulatory Concerns

The Lula administration is under increasing pressure to establish effective regulations for Brazil's rapidly growing betting industry. While betting has been legal in Brazil since 2018, a lack of clear regulatory measures has created a legal grey area. The government has worked to implement rules over the past year, intending to regulate operators and collect taxes from the industry.

Meanwhile, the SPA faces mounting criticism, not only from companies left off the list but also from a broader segment of the gambling industry. One company, Sportvip Group International Apostas, filed a lawsuit after its request for inclusion on the approved list was denied. The company claimed that its exclusion posed a “very serious risk of incalculable financial and reputational losses.” Though Sportvip’s request for a preliminary injunction was rejected, its legal battle continues, and the court has asked the Ministry of Finance to comment on the case.

Adding to the pressure on the Lula government, a report from the Central Bank revealed that, in August alone, R$3 billion was transferred to betting platforms via the Pix payment system by people covered under the Bolsa Família welfare program. The revelation has fueled concerns over the potential social impact of unregulated betting and highlighted the need for stronger government oversight.

As Brazil’s legal market prepares to open in January 2025, the government's response to these lawsuits and its handling of the remaining regulatory challenges will likely shape the future of the industry.

Source: Brazil Faces Legal Action Over Exclusion of Betting Operators, lcb.org, October 17, 2024.