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Normative ordinance of the Ministry of Finance regulates payment transactions relating to sports betting

April 23rd, 2024

The Ministry of Finance, through the Secretariat of Prizes and Betting (“SPA”), published Normative Ordinance SPA/MF No. 615, of April 16, 2024 (“Normative Ordinance”), establishing general rules applicable to payment transactions made by agents authorized to operate the lottery modality of fixed-odd bets, in virtual or physical modalities (“Sports Betting”), as provided for in Law No. 14,790, of December 29, 2023 (“Law No. 14,790/23”).

Cash-in and Cash-out for bettors on Sports Betting platforms The Normative Ordinance defines specific categories of payment accounts to be used within the scope of Sports Betting platforms. Definitions for transactional accounts, graphic accounts, proprietary accounts and registered accounts were all created to support the financial flow of cash-in and cash-out generated by the transactions of bettors.

Therefore, inflows and withdrawals of financial resources by bettors in and from Sports Betting platforms, as well as the payment of prizes by operating agents to bettors, must be made exclusively through electronic transfers between “registered accounts” held by each bettor and “transactional accounts” operated on each betting platform by its authorized operating agent.

According to the Normative Ordinance, the bettor’s “registered account” corresponds to the deposit or pre-paid payment account, owned by the bettor, maintained in a financial or payment institution authorized to operate by the Central Bank of Brazil, serving as origin of financial inflows and as the destination for prizes received and withdrawals of financial resources made by bettors from the operating agent.

On the other hand, the operating agent’s “transactional account” is also a prepaid deposit or payment account owned by the operating agent and maintained at a financial or payment institution, which serves to hold (i) financial inflows from bettors, (ii) amounts relating to open bets or, (iii) at the bettor’s sole discretion, any prizes that may be received.

According to the Normative Ordinance, financial transfers can be carried out through (i) Instant Payment – PIX; (ii) Available Electronic Transfer – TED; (iii) debit or prepaid card, and (iv) transfer in the books themselves (book transfer), in the case of accounts maintained at the same institution.

The prohibition established by the Normative Ordinance regarding financial inflows through other means is very important. This is the case, for example, of forbidden transfers in the form of (i) cash; (ii) payment slips; (iii) checks; (iv) virtual assets or other types of crypto assets; (v) payments or transfers originating from an account that has not been previously registered by the bettor; (vi) payments or transfers from third parties; (vii) credit cards or any other postpaid payment instruments; as well as (viii) any electronic transfer alternative that is not described among the previous ones.

Highlights of the account modalities created by the Normative Ordinance

It is worth highlighting important aspects concerning each of the account modalities created under the terms of the Normative Ordinance.

As for the graphic account, the operating agent cannot create restrictions or conditions for bettors to move funds, such as withdrawals from balances available. In these cases, the Normative Ordinance determines that the funds must be available for transactions in the bettor’s respective registered account within 120 minutes of the withdrawal request. Also regarding the graphic account, the agent cannot promise or grant remuneration on the funds deposited, in any form.

Regarding transactional accounts, it is worth noting that the Normative Ordinance allows the operating agent to maintain and use several accounts, even with different IPs or FIs, in which case the aggregate balance of all of these accounts must permanently equal the sum of the financial balances available to all bettors (net balance of contributions settled and financial withdrawals carried out, plus the prizes received that are held in the graphic account and deducted from the value of the bets placed), plus the aggregate balance of open bets (equivalent to the total value of the bets placed by the bettors, not available for new transactions, which has not yet been financially settled by the operating agent).

In addition, the Normative Ordinance prohibits operating agents from holding their own funds deposited in the transactional accounts they manage, and from using bettors’ funds to cover prizes that they are obliged to pay. On the other hand, operators are allowed to invest the balance of the transactional accounts they operate in federal government bonds.

Payment Institutions not authorized by the Central Bank

The Normative Ordinance prohibited the provision of payment services for the Sports Betting segment by institutions not authorized to operate by the Central Bank of Brazil. Therefore, accounts from which transaction orders are issued by bettors must be held exclusively with institutions authorized to operate by the Central Bank, aiming to ensure greater operational security for the provision of payment services within the scope of Sports Betting platforms.

Another key aspect ratified by the Normative Ordinance concerns the segregation of bettors’ wallet funds from the funds owned by the Sports Betting platform itself. Therefore, it is important to emphasize that the Normative Ordinance provides that the funds held in transactional accounts (i) constitute separate assets from the assets of the operating agent and, to this extent, are not to be confused with the heritage of the Sports Betting platform nor do they respond directly or indirectly for the obligations of the operating agent; (ii) do not make up the assets of the betting operator, for the purposes of bankruptcy, judicial or extrajudicial recovery, intervention or judicial or extrajudicial liquidation; and (iii) cannot be given as collateral to back up debts undertaken by the betting operating agent.

Graphic Account

The Normative Ordinance also introduced the concept of “graphic account”, which is the electronic account made available by the operating agent in its betting system to enable each bettor to manage their bets and financial resources with greater transparency.

The Normative Ordinance establishes that the graphic account must provide the bettor with, at least, information on (i) the history of transactions over the last 36 months, (ii) the value of open bets; and (iii) the available financial balance (which corresponds to the net balance of inflows and financial withdrawals, plus any received prizes that are held in the graphic account, and deducted from the value of placed bets).

Risk Control:

According to the Normative Ordinance, operating agents must keep operational risks under constant control, and are responsible for implementing policies aimed at managing exposure to liquidity risks.

Furthermore, agents must establish risk exposure limits, implement mitigation processes and develop a contingency plan with details of additional origins of funds, responsibilities, and procedures to face liquidity stress situations.

Finally, operators must provide a minimum BRL 5 million financial reserve in their books, which must be held in custody as a government bond with an institution authorized to operate by the Central Bank of Brazil.

Contractual Obligations. When entering into payment service contracts with institutions authorized to operate in this market by the Central Bank of Brazil, operating agents must include provisions establishing the parties’ obligation to follow and comply with the provisions of the Normative Ordinance.

Effective term

The Normative Ordinance defined a period of six months, counting from the eventual date of publication of the regulation by the SPA, to regulate the obtaining of authorization for commercial exploitation of the sector, so that the prohibition defined in article 21 of Law No. 14,790/23 enters into force, prohibiting financial and payment institutions from carrying out transactions that enable the operation of Sports Betting platforms not authorized to operate by the Ministry of Finance.

Demarest’s Banking and Finance team is available to assist clients and those interested in the matter.

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Fausto Muniz Miyazato Teixeira

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