Paiani: “We have to move forward with the approval of a Regulatory Framework for Gaming”

With great quality and clarity in the presentation of his ideas, in this exclusive interview, Adão Paiani, a prominent Brazilian lawyer specialized in Gambling Regulation, answers all doubts regarding the current challenges of the debate on gambling legislation in Brazil. Paiani analyzes the discussion of the theme in the National Congress; expresses his opinion about taxes, the gaming modalities to be approved, the participation of foreign companies and the support to local economy. He also proposes a sincere and in-depth dialogue between all the stakeholders. G&M News offers here a mandatory reading article for any executive interested in the future of the Brazilian market.

For this lawyer, the regulated gambling sector in Brazil could generate between R$30 and R$40 billion annually (between USD 5.46 billion to USD 7.28 billion).
For this lawyer, the regulated gambling sector in Brazil could generate between R$30 and R$40 billion annually (between USD 5.46 billion to USD 7.28 billion).

Can you please briefly tell us about your background and your interest in gaming and regulatory issues?

I am a lawyer, working in Criminal, Administrative, Business and Constitutional Law; and Legal Consultant, in coordination and assistance in the elaboration and monitoring of bills, constitutional amendment proposals and other procedures inherent to the legislative process with the National Congress. I have always been in favor of legalizing gambling in Brazil, as I consider this an activity with an immense potential for generating jobs, wealth, income and, consequently, development for the country. Brazilians like to play, and Brazil is one of the places where people play the most in the world. It is a habit strongly rooted in our way of living, and derived from historical and socio-cultural aspects of our people. Its banning was already an anachronistic measure at the time it occurred (in 1946, by an act of former President Eurico Gaspar Dutra). Today, more than ever, I don’t find any valid and reasonable arguments to justify it. Brazil is a tourism-oriented country. Mainly for its exploitation in leisure and entertainment projects, the regulation of gaming will certainly be a factor in the resumption of economic activity, so necessary for the country in the complex context derived from the pandemic of COVID-19 and, precisely, in one of the most hardly hit sectors, just like Tourism. To tell a few numbers, just the legalization of betting would bring to the formal economy around R$15 billion (USD 2.66 billion), which is approximately what the illegal betting market moves in the country. These resources will increase tax collection, formalize the existence of thousands of jobs and generate so many others; something fundamental for the economic moment that the country is experiencing, exponentially more serious in a context of health crisis.

Internationally, many people ask about if there really is a political will in Brazil to move forward with the legalization of gambling, both in person and online. The recent election of key men in Congress, favorable to the regulation of the activity, would seem to confirm that it is. What is your opinion? Why does Brazil not have a comprehensive legal framework for online gambling and sports betting today?

From a political point of view, I believe this is the best moment to effectively discuss the legalization of gambling, in all of its modalities. This issue has been considerably advancing in the National Congress, both in the Chamber of Deputies and in the Senate. I understand that the new leaders of the two Houses have the necessary vision to accelerate the discussion and approval of those bills in favor of establishing a Regulatory Framework for Gaming. There is, however, a lot of work to be done. The timing is good, but there is still a game to be won. It is necessary to work on resistance through a process of convincing and informing parliamentarians. These dynamics depend on an intense work with the political leaders and their allies; and this requires effort, organization and a lot of capacity to mobilize the sector. The establishment of the much-needed legal framework that regulates online gambling and sports betting, for example, depends on efficiently taking the necessary information to lawmakers, so that they can build proposals with the necessary quality not only to regulate these activities, but also to be approved by the National Congress and, later, to be sanctioned by president Jair Bolsonaro.

What kind of system should Brazil implement to regulate the activity, considering different perspectives on the sector from states and municipalities? Are there any countries (in the region or other continents) with a gaming legislation that can be taken as an example by the Brazilian market?

I understand that the legalization could favor projects of companies that have expertise in the exploration of the activity; in its own way or through partnerships with local Brazilian companies, sharing experiences in regulation and compliance in their countries of origin, as well as technology. At the international level, I believe that experience in the sector of countries such as the United States, due to its geographical extension and regional complexities, can greatly benefit us; without forgetting also about some neighboring countries, especially from the Mercosur, a chosen destination of many Brazilians in search of recreational gaming, with which we have a lot to learn from.

About tax issues, what do you think should be the acceptable tax values ​​for the activity, both for the State and for private companies?

The main challenge in regulation is to observe what has been done abroad in terms of gaming taxes. We must not forget that investment has to be attractive to anyone who is willing to trust in our market, taking into account the peculiarities of the so-called “Custo Brasil.” The investment in structuring a market that will start practically from scratch will be high; and attracting companies with experience and the ability to succeed in the exploitation of gambling in Brazil will require offering a good ROI, compatible with the investment companies make. With goodwill, being reasonable and having some common sense, it is perfectly possible to reconcile the attractiveness of the business, for investors, with a correct tax collection, for the benefit of society.

How to create legislation where all parties involved in the gaming industry can participate and their voices to be heard? How can relations between different interest groups be improved?

The moment is for dialogue, and I am convinced that the National Congress (Chamber and Federal Senate) is the appropriate forum for this. We have to keep in mind that it is not just about legalizing an activity, in this case, gambling; but to lay the foundations for an entire production and service chain that will move in its own orbit. Relationships between different interest groups can be optimized as each clearly understands what will be its role in the process of regulating and starting activities in a market that is not new, but that will start to function with serious rules of procedure and regulation. However, lots of dialogue and no decisions are meaningless. We have to move forward with the approval of the Regulatory Framework. This will make it necessary to give objectivity to discussions, both within Parliament and with the Executive and Judicial branches. Everyone should be called to participate in the debate, with the goal of approving the regulation as soon as possible.

Taking a look on the expectations of the global gaming industry, how can the country respond to the interest of foreign operators? How can Brazil balance their participation, favoring at the same time the evolution of local companies?

Two main actions are needed: 1) to offer foreign investors legal certainty and predictability for the return of their investments, in addition to the establishment of a fair tax base, according to international parameters, but taking into account current country’s conditions; 2) to give national companies the possibility of partnering with companies from abroad. These companies would contribute with their knowledge, experience and transfer of technology for the most proper management of gaming as a business.

Are you optimistic about the future on this subject? When do you anticipate gaming will be legalized in the country? How much money do you calculate that, on average, the sector will move in annual terms?

I am very optimistic, but I also have my feet on the ground. We have a lot of work ahead, both because of a strong local resistance against regulation, coming from sectors that have not yet understood that the aim is precisely to regulate and eliminate the vices of a market that already exists, and that will not cease to exist just because it is not regulated; as for those who, by choice, prefer to remain in illegality, promoting practices that are not benefiting society. If we do a hard and consistent effort, it is possible to approve and put in place a Regulatory Framework for Gaming during this year or, in the worst case, before the end of this legislature, in 2022. We are experiencing a dramatic moment in Brazil, caused by the effects of the pandemic, with a deep reduction of our economic activity and, consequently, our tax collection. With the regulation of gaming, only with direct taxation, we are talking about something between R$15 and R$20 billion per year (USD 2.66 billion to USD 3.54 billion). In 10 years, this would mean R$200 billion (USD 35.44 billion). We are only talking about direct taxes, not to mention the repercussions in the economic support chain. With the granting of concessions, in new revenue, we are talking about values ​​ranging from R$30 to R$40 billion (USD 5.46 billion to USD 7.28 billion). These are indispensable resources for Brazil and, certainly, we cannot in any way do without such valuable income.