After his participation in the recent Online Gaming Summit in Brazil, Hervé Schlosser, founder and CEO, Sportnco, describes the current situation of that market and the deployment of his company in Latin America.
What are the latest regulatory news about gaming in Brazil, according to what you have heard at the meeting?
For the first time in Brazil, a law has been voted in Congress that legalizes only and exclusively sports betting, both online and land-based. For the first quarter of 2020, the publication of the decree that will define the way in which bets will be regulated is expected. This will determine the path for a real market opening in the second half of next year.
What potential could the gaming business represent in that market?
According to KPMG estimates, the online sports betting market should represent a GGR of between €1and €1.5 billion, and the offline would mean a little less, between €800 million and €1.5 billion of the GGR. These values only explain the first year of operations. Considering that it is a country with 211 million inhabitants who show great passion for sports, it is clear that there is enormous growth potential and that, in relation to gambling, Brazil really appears as a land of opportunities.
How would the tax issue of the activity be established?
The tax percentage would be based on the total volume of the business (turnover): 3 percent for the online and 6 percent for the land-based segment. The industry is lobbying to try to obtain a regulation focused on a certain percentage of the GGR, which is the real income that operators get. However, a 3 percent rate on online turnover is way below the 8 or 9 percent currently in force in countries such as Portugal or France, where there are few operators (there are about 13 in France) that must fight to sustain the business. Also, in Brazil, to get a license, a company must present a financial guarantee of about R18 million (approximately, €4 million). In turn, the licensee will also have the possibility to negotiate agreements with the sub-licensee.
How will your company seek to advance in the Brazilian market, once it is definitely regulated?
During 2019, Sportnco launched its development in Latin America. With one of our current European clients, we have prepared all the technical requirements to present an offer to obtain a license in the province of Buenos Aires, Argentina. While in Brazil, the strategy is to offer our unique turnkey solution in sports betting (software, odds and risk management, web design and marketing services) for the following cases: a) our current customers in Europe that are willing to expand to Latin America; b) new LatAm customers. In conclusion, based on the specific model of the Brazilian market regulation and the huge size of that market, we consider obtaining a license. We will not attempt to operate, but to grant a sub-license to other operators who would also use our technology and services.