Article: Online gaming in Brazil: demystifying the classification and legal modalities for operators

Law 14,790 regulated iGaming in Brazil, but the classification of online gaming generates uncertainty. Requirements such as fixed quota and randomness of the result are essential. In an exclusive article for GMB, Filipe Senna, partner at Jantalia Advogados, presents some criteria to be taken into account by the Ministry of Finance and indicates that it will be up to the laboratories to show that the offers meet pre-defined multipliers and that they must be available to users.

Since the publication of Law No. 14,790 on December 29, 2023, which regulates fixed-odds betting and online [games of chance], there has been a recurring question regarding the classification of online gaming and which modalities may be operated in Brazil post-regulation. Amidst this uncertainty, it is important to elucidate and simplify the analysis of the legality of a modality in relation to what the regulation entails.

This is because the Brazilian legislator, when drafting Law No. 14,790 of 2023, chose not to segment and legalize specific modalities of online games of chance. On the other hand, parameters and requirements were defined to which online games of chance must adhere to be certified and authorized for distribution in the country.

The lawful gaming modalities will be those that meet the requirements presented in the law and, eventually, in future regulations, as well as being obligatorily operated in a virtual environment.

  1. All online gaming needs to present their fixed odds

First and foremost, it is important to identify the essence of the regulation of the betting and online gaming sector: fixed-odds are a fundamental requirement of any modality to be offered in the regulated environment. In any option of betting or online game, at the moment of placing the bet, the user is presented with the multiplier factor of the amount wagered in case of a correct forecast and consequent prize (Law No. 13,756 – Art. 29, § 1; Law No. 14,790, art. 2, item II).

In practice, in a slot game eligible to be operated in Brazil, the operator must demonstrate, in the interface and rules of the game, the multiplier factor corresponding to each of the possible winning combinations, the fixed odds for each winning sequence. When entering the game, the user must be informed and provided with a “template” showing how much will be paid for each of the combinations, including the maximum and minimum winnings for each sequence.

In crash games, the fixed-odds are more easily identifiable in the online gaming event. As a rule, the operator only defines the minimum and maximum values that the algorithm can reach in each round, which are fixed as rules of the game – e.g., the game’s dynamics start at 1.01x and reach up to 999x. However, the fixed odds themselves in this modality can be chosen by the user, by defining the auto cashout multiplier – the maximum and reference multiplier of how much the player can win in case of a correct forecast.

In a standard crash game, the player either sets the auto cashout at a value of interest, or adopts the maximum reference value of the game as the fixed odds, which are multipliers of “how much the bettor can win”, the player’s potential winnings, as per Art. 29, § 1, of Law No. 13,756, of 2018. However, during the dynamics of the game, the player may choose to withdraw prematurely and, eventually, receive a smaller amount than the fixed odds, without disqualifying the fact that the user knew and was informed of the maximum they could win when placing the bet.

In the event that the player chooses the auto cashout multiplier at 25.0x, for example, the fixed odds (maximum potential winnings) are defined at this value, meaning the player’s potential gain in the round. If, during the game dynamics, the user believes that the multiplier has reached a satisfactory value, even lower than the chosen reference, and decides to withdraw at 10.5x, for example, this player’s option does not change the fact that the fixed odds defined for that round were 25.0x.

If there are deeper concerns regarding the identification of fixed odds in crash games, for the sake of greater security in compliance with regulations, the operator can adapt the modality so that the choice of an auto cashout multiplier is mandatory for the user upon entering the game. This would be a way to reinforce the presence of a fixed odds defined by the player themselves, even though the maximum winnings value is already stated in the rules and can be identified as the game’s fixed odds.

  1. The outcome of the game must result from a Random Number Generator, symbols, figures, or objects

The 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’s or game event’s outcome, guaranteed by a Random Number Generator, symbols, figures, or objects, as per Article 2, Section VIII, of Law No. 14,790, of 2023.

This randomness is one of the fundamental principles of the gaming contract since its inception, when the activity was conducted in physical environments, or even without technological components, and gained more prominence with the application of technical regulation in the gaming sector.

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