In this fourth article in the series "Gaming, betting and eSports Law: what do you need to know?", we deal with the concepts of gambling, the elements that differentiate the practices and the laws that regulate them.
Gambling. This broad category includes all practices, whether or not permitted by law and Brazilian case law, in which, in addition to the purpose of entertainment, the following elements are identified cumulatively:
- Payment of a consideration made by the person either directly (such as payment for the bet itself) or indirectly (as in the case of participation in a prize draw conditional on payment for some product or service, collection of personal data, etc.).
- The person has the chance of winning a financial or non-financial prize. It could be, for example, a product or an indirect benefit - such as discounts, loyalty program points, specific NFTs, accessories for characters in games, experiences, etc.
- The prize is won by participating in a game that depends solely on luck (chance) or luck combined with the participant's skill (skill). Games of pure skill would not be included.
There is a lot of disagreement about this third element. So far, there is no broad definition in Brazil. The expression "games of chance" adopted in the well-known article 50, paragraph 3, "a", of the Criminal Contraventions Law, which prohibits their exploitation, stands out. The provision defines a game of chance as "a game in which winning or losing depends exclusively or mainly on luck".
Subparagraphs b and c of paragraph 3 also mention other practices considered games of chance by the Brazilian legislator. Both deal with betting, whether on horse races not organized with state authorization or on any sports practice. There is a debate as to whether or not skill prevails in sports betting, as we will show below.
Some legislations (such as those of certain US states) and some of the literature on the subject work with a narrower concept of gambling, which only includes practices in which the results depend exclusively or predominantly on luck. If the player's skill is predominant, the practice is not considered gambling according to this concept.
How do you know if luck or skill is predominant?
One of the techniques used is the so-called "dominant factor or predominance test", which consists of identifying which of the elements is more present. The idea is to break down and understand all the elements and determine, on a scale, which ones prevail over the others, in a weighting exercise.
Other regulations are broader and consider the three elements above without distinguishing whether it is luck or skill that prevails.
This second group includes, for example, the broad concept introduced by the UK's Gambling Act of 2005, which encompasses the practices of gaming, betting and participating in lotteries (Section 3). Gambling would thus be the genus of these three species:
- Gaming: seen as "playing a game of chance for a prize" - Section 6 (1). At first reading, this could suggest games based solely on luck or predominantly on luck. For the Gambling Act, however, "game of chance" includes: games that involve luck and skill; games that involve luck even if skill prevails; and games in which elements of luck are introduced - Section 6 (2) (a). The practice of sports does not characterize a "game of chance" - Section 6 (2) (b).
- Betting: placing or accepting a bet on the results of races, competitions or any event; the probability of anything happening or not happening; or whether something is true or not - Section 9 (1).
- Lottery: any situation or arrangement that characterizes any of the situations defined in the Gambling Act Subsections (2) and (3).
The same occurs in French legislation in its Code de la sécurité intérieure (Article L 320-1), which, although it uses the expression games of chance, adopts the broad meaning. As such, it considers all practices that depend totally or partially on luck to be included in this category.
France used to separate games of chance, which were prohibited, from games of skill, which were permitted. As of 2019, they are all prohibited, with specific and regulated permissions for only a few practices.
Legality or illegality of gambling practices in Brazil
Currently, due to article 50 of the Criminal Contraventions Law, the assessment of the legality or illegality of a given practice in Brazil is linked to the legal concept of gambling and depends on the joint analysis of the two points below:
- Presence of the three elements: consideration, prize and luck (isolated or predominant). If any of them is not present, regardless of the item below, the practice will be considered lawful.
- Even if all three elements are present, it is necessary to check whether there is authorization in legislation or case law for the practice to be carried out, even if it is based on the three elements above.
By way of exception, some practices are permitted in Brazil, such as lotteries operated directly or indirectly by the state. If there is no legal permission and all three elements are present, the practice is prohibited under Article 50. If skill prevails (as in the case of sports poker), the practice is permitted.
Casino games. This subcategory of gambling includes all typical casino practices in which the results depend exclusively or predominantly on luck. Some examples:
- slot machines;
- dice-based games;
- jogo do bicho; and
- bingo with no social purpose
These practices are prohibited in Brazil under article 50 of the Criminal Contraventions Act, whether they take place in person or online. However, if the skill component prevails in any practice carried out in a face-to-face or online casino (as we will see later in the case of poker), the practice will not be considered gambling and may be permitted.
There are a number of bills underway that discuss the legalization of these practices. The main one is Bill 442/91, which proposes to allow most casino games and gambling practices in general. The bill was approved in 2022 in the Chamber of Deputies and is currently before the Federal Senate.
Lotteries. Another subcategory of gambling is lotteries. They bring together the elements of gambling, since there is a consideration (payment of money) by the player, who competes for predefined prizes. The prizes are conditional on luck. Lotteries are permitted in Brazil and operated at federal and state level.
At the federal level, according to Decree-Law 204/67 and federal laws 6.717/79 and 759/69, lotteries are organized and operated exclusively by Caixa Econômica Federal.
State exploitation was permitted by the Supreme Court in 2020 (Action for Failure to Comply with Fundamental Precept 492). Each state is responsible for defining how it operates the lottery.
Sports betting. Sports betting has been a growing and successful activity all over the world. In Brazil, it is estimated that the activity will generate R$12 billion by 2023.
Here, the modality is already commonplace and practiced on platforms hosted outside the country. Its regulation and permission began with Federal Law 13.756/18, which, in its article 29, defined sports betting as fixed-odds betting.
The regulation was renewed by Provisional Measure 1.182/23 and the Normative Ordinance of the Ministry of Finance 1.330/23 - to learn more about the norm, read a specific article published on the portal.
Executive Bill 3.626/23 is also currently being processed. The bill, which aims to regulate the issue, has already been approved by the Chamber of Deputies in the first vote and recently by the Federal Senate. The text returned to the House.
Sports betting or fixed-odds betting (or sports betting, online or otherwise) is defined in the legal system as betting systems related to real sporting events, in which, at the time the bet is placed, the bettor knows how much he could win if the prediction of the bet is confirmed.
By going into a little more detail about the concept, it is possible to extract the following elements:
- there is a betting contract signed with a promise of a consideration for the user if the prediction is confirmed;
- the bet must be linked to a real sporting event, which includes any sporting event - such as soccer, chess, eSports - but excludes fantasy or non-real situations (fantasy sports, for example);
- the activity must be carried out by a physical or digital system (set of organized elements), usually supported by the well-known betting platforms that operate the business (bookmakers); and
- when the bet is placed (either before the sporting event or during it), the bettor already knows how much he will receive if the prediction of his bet (future results of the sporting event) is confirmed (bet result equals the actual final result).
Poker. Poker in Brazil, mainly online, has grown exponentially, especially after the pandemic, with the popularization of home office.
There is no specific regulation on the practice of poker in the country and the legal debates on the subject refer, in particular, to the discussion of whether the practice is considered gambling or game of chance (based on luck) or not (based on skill).
How can gaming, betting and eSports practices be conducted in an ethical, responsible and legally compliant manner? This is the subject of the fifth and final article in this series.