On May 6, 2024, the Secretariat of Prizes and Betting (SPA) of the Ministry of Finance published Ordinance No. 722, which establishes the technical and security requirements for betting systems on sports betting platforms and online gaming, as well as data centers to be used by companies interested in obtaining a license to provide such services in Brazil.
Undoubtedly, this is the most extensive and detailed ordinance ever published by the Ministry of Finance regarding fixed-odds betting until today, comprising over 35 pages and five annexes with in-depth technical content.
To the reader, it is advised: in this article, the intention is to address the most interesting points of the regulation from a panoramic view. Given the wealth of details presented in the annexes of Ordinance No. 722/2024, I suggest that all those interested in the topic also read the text presented by the Ministry of Finance in its entirety.
Ordinance No. 722/2024 presents, in summary:
(i) the initial concepts of the Ordinance, necessary for understanding the structuring of the betting system, platform, and betting data center;
(ii) the technical requirements related to the operation of fixed-odds betting in Brazil;
(iii) the certification requirements and evaluation report structuring for certification;
(iv) the supervision and oversight of operators;
(v) betting terminals; and
(vi) the concept of online games of chance.
I – Location of betting systems and operator data centers
The first interesting point of Ordinance No. 722/2024 lies in the wording of Article 4, regarding the technical requirements, which determines that the betting systems and data centers of operators licensed in the country must be located within Brazilian territory and in compliance with the provisions of the General Data Protection Law (Law No. 13,709, of 2018 – LGPD).
This territorial provision of the data center has, as one of its main objectives, to enable constant and uninterrupted oversight and regulation of operators. Consequently, operators must be aware that, in this way, operational data will also become tangible to the Brazilian Judiciary.
On the other hand, paragraph 1 of Article 4 itself establishes an exception to the territorial provision of the betting system and data center.
The operator may also host its data centers and betting systems in foreign territory, provided that the host country has an International Legal Cooperation Agreement with Brazil, both in civil (consumer) and criminal matters. Also, the operator must comply with the requirements for international data transfer provided in the LGPD.
In the case of hosting data centers abroad, the operator must:
(i) obtain specific and prior authorization from the data subject for international transfer, with a clear explanation of the operation’s purpose;
(ii) provide secure and unrestricted access, remotely and in person, to the Ministry of Finance to systems and data centers;
(iii) replicate in Brazil the databases and information, which will be continuously updated, with periodic tests; and
(iv) present a Business Continuity Plan for Information Technology, in case of critical situations that may jeopardize the operation.
Ordinance No. 722/2024 requires that the Brazilian Public Authority, within the inherent principles of the State, potentially have full access to all fixed-odds betting operation data, given the tangible location of operators’ databases.
This issue is reinforced in Articles 9 and 10 of the Ordinance, which require that, for supervision and oversight by the Ministry of Finance, fixed-odds betting operators must, at any time, grant full access to the betting systems to the supervisory units and agents.
The betting system, including its sports betting platforms and online games of chance, will also be subjected to inspection procedures as requested by the Ministry of Finance.
Finally, fixed-odds betting operators must submit to the Ministry of Finance the data related to bets, bettors, bettor wallets, legal destinations, and other information about their operation, according to the periodicity and format established by the Ministry of Finance in a Manual available on the official website.
Consequently, under the regulations of this Ordinance, it is expressly prohibited to host data centers and betting systems in famous tax havens such as Curaçao, Gibraltar, and other territories listed in Federal Revenue Instruction No. 1,037 of 2010.
II – All authorized operators will have the domain “bet.br”
Article 5 of Ordinance No. 722/2024 provides that the electronic channels used by the operator agent to offer fixed-odds bets must use the domain registration “bet.br”, according to specific regulations to be edited by the Ministry of Finance. Thus, every operator authorized to offer fixed-odds bets in Brazil must update its domain to “bet.br”.
III – Sports betting terminals
The third interesting point of Ordinance No. 722/2024 is the more specific regulation of sports betting terminals, a device provided by the operator agent in which the bettor can place bets in the physical mode.
Particularly, I wonder if the betting terminals are stillborn – because the bettor can place bets via their cell phone from any location; or are thematically interesting – deployed in events and strategic situations; and democratic to various bettors, like my 93-year-old grandfather who can’t bet via cell phone but would certainly use a betting terminal.
In any case, fixed-odds betting operators will be able to offer bets on real sports-themed events in the physical mode through betting terminals. These terminals must always be connected and integrated into the operator’s betting system, observing the technical requirements established in Annexes I and II of the aforementioned Ordinance.
It is important to note that fixed-odds bets on online gaming events can only be offered in a virtual environment, and it is not possible to operate online games of chance on betting terminals. This important issue is still pending evaluation by the Federal Senate, in the substitute to Bill No. 442 of 1991 – the Regulatory Framework for Games of Chance in Brazil – which calls for approval.
IV – The concept of online games of chance
First and foremost, I always insist on the correct denomination of this activity: “gambling” is a pejorative and outdated term, stemming from the Penal Contraventions Law, which should have been buried by now. The correct terms are “games of chance” or “games of luck”, after all, players seek luck and fortune, no one seeks misfortune.
Continuing, the last chapter of Ordinance No. 722/2024 objectively stipulates the requirements for identifying modalities as online games of chance within the context of fixed-odds betting. I believe this topic may have been one of the most controversial and criticized in this Ordinance.
Firstly, online games of chance must necessarily involve a fixed odd: a multiplication factor of the amount wagered that defines the amount to be received by the bettor, in case of winning, at the time the bet is placed, for each unit of national currency wagered.
Thus, the fixed odd is a fundamental requirement for any and all modalities to be offered in the contemporary regulated environment. In any betting or online game option, at the time of entering the game event, the user must be presented with the multiplication factor of the amount wagered in case of a correct forecast and consequent prize (Law No. 13,756 – article 29, paragraph 1; Law No. 14,790, article 2, item II).
In practice, in a slot game eligible to be operated in Brazil, the operator must demonstrate, in the game interface and rules, the multiplication factor corresponding to each of the possible winning combinations, the fixed odd for each sequence eligible for a prize. When entering the game, the user must be informed and provided with a table showing how much will be paid for each of the combinations, also indicating the maximum and minimum winnings for each sequence.
Next, Ordinance No. 722/2024 reinforces the need for the result of the online casino game to be determined by the outcome of a future random event, based on a random number generator (RNG), symbols, figures, or objects defined in the rules system.
This second requirement represents one of the most significant and important elements for the online gaming industry, which is the randomness or unpredictability of the round or game event result, guaranteed by a random number generator, symbols, figures, or objects, as per article 2, item VIII, of Law No. 14,790/2023.
This randomness is one of the fundamental principles of the gaming contract since its origin when the activity was operated in physical environments, or even without technological components, and gained more notoriety with the application of technical regulation in the gaming sector.
The regulatory conduct and the objective underlying this requirement are based on the need for the game results to be effectively unpredictable and completely independent of external interferences or influences on its dynamics and the result itself.
This requirement is inherent even to the entertainment of the game because predictability or pre-definition of the result removes the excitement of games of chance when one awaits the “intervention of luck”.
Although there are a series of criticisms regarding this concept, I have already written an opinion article to the friends at Games Magazine Brazil (GMB) demystifying the classification of online games of chance, which can be accessed here. Something that is regarded as complex can indeed be simplified in a technical manner.
However, regarding the concept of online gaming and the limits of operation of this modality by authorized companies in Brazil, it remains to be seen whether an extensive interpretation will be adopted – as proposed in the other article – or if it will be merely restrictive, limiting our rich diversity of online games of chance.
