Brazil Launch Eve
Brazil's regulated online gambling industry is slated to go live on January 1, 2025. The launch will create the largest regulated market in the Americas.
The Bulletin Board
THE LEDE: Brazil’s regulated online gambling industry goes live tomorrow.
VIEWS: Is a credit card ban a necessary policy to pass an online casino bill?
BEYOND the HEADLINE: Some credit cards are coding gambling transactions as cash advances (allegedly).
AROUND the WATERCOOLER: What’s in a name, and putting the focus where it belongs.
STRAY THOUGHTS: Is gambling really entertainment?
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The Lede: Brazil’s Online Gambling Industry Launches Tomorrow
This entry is a bit afield of STTP’s typical US-focused coverage. Still, one of the biggest developments in the legal online gambling sector in recent years is set to take place tomorrow, January 1, 2025, when the regulated Brazilian online gambling market launches.
The launch is a year in the making, and at last count, the Brazilian government had granted 71 federal licenses to online operators.
That said, it’s been a bumpy ride since Brazilian President Luiz Inácio Lula da Silva signed legislation regulating online gambling in December 2023.
The country has imposed stringent regulations, with a significant focus on responsible gambling, including prohibiting bonuses for new customers and restricting the use of credit cards and cryptocurrencies for wagering.
On the ad front, the country’s rules (h/t to IGB) state that ads “must not present betting as “socially attractive” and cannot involve statements from influencers or celebrities that imply gambling leads to personal, social or financial success,” and while sponsorships are allowed, “operators must be clearly identifiable as the sponsor and refrain from appealing to children.”
There is also an overhanging zero-tolerance threat as President Lula issued a warning to online gambling operators: Get your house in order, or I’ll pull the plug. Lula said he would ban online betting if regulation does not cure "addiction" by bettors. "If regulation doesn't work, I won't hesitate in putting an end to (betting) definitively," he told reporters.
One commentator who is more pessimistic about Brazil is Alun Bowden, who wrote in his The State of Online Gambling Substack:
“Everyone is very excited about Brazil… But the way regulation has been introduced does not give me high hopes it will bring a massive share of the existing grey market inside that regulated tent.
“Brazil is a very crypto-savvy market, and while a lot of licenses have been awarded, there will be a number of very effective black market operators happily sat outside taking advantage of all the things regulated operators are not allowed to do.”
Another interesting facet of the Brazil launch I previously covered was Brazilian regulators' discovery of how difficult it is to shut down illegal offshore sites.
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Credit Cards Becoming a Hot Industry Topic
I previously wrote about the credit card prohibition in the National Council of Legislators from Gaming States’s (NCLGS) model online casino legislation draft:
“Prohibiting credit cards sounds like a robust responsible gambling safeguard, but evidence (where available) suggests the policy has zero impact and possibly exacerbates the problem amongst at-risk gamblers.”
Former New Jersey Division of Gaming Enforcement Director David Rebuck expressed similar misgivings at the NCLGS Winter Meeting in December, noting that the data and research on credit card prohibitions don’t suggest there is a benefit.
However, there is a very valid reason to impose a credit card ban, and that reason is to pass a bill — the “don’t let perfect be the enemy of good” argument.
Consider the comments by New Hampshire Sen. Tim Lang, a member of the NCLGS model legislation committee and a sponsor of online casino legislation in New Hampshire.
According to Lang (from Jessica Welman’s reporting), “If I was to allow credit cards, the bill would die on the spot. It wouldn’t go any further at all. So while data may suggest otherwise, if the legislators in the room will want to get elected again and want the actual bill passed… you put credit cards in, and that will get your bill killed in most states.”
NCLGS President and West Virginia Del. Shawn Fluharty perfectly summed up the rationale for a credit card ban, “iGaming bills are not moving currently.”
Beyond the Headline: Credit Cards Hit Bettors with Cash Advance Fees
The credit card debate isn’t confined to passing legislation.
Consider this excerpt from a December 20 column from Alex Kirschner in Slate:
“Reasonable people can disagree on reforms, but one improvement is obvious: The United States deserves a sports betting industry that does not get any of its funding via credit cards. The major card companies could see to that. Assuming they won’t, lawmakers should.”
Kirschner goes on to note the lack of friction in funding betting accounts:
“I could not log into just about any stock brokerage account right now and deposit funds with a credit card… I could open up a “margin” trading account and invest with borrowed money, but that would take several more steps than are required to get funds from a credit card into a sports betting account—which is as simple as selecting a credit card deposit from a menu of options.
“[…]
“If you can’t use your AmEx to buy an S&P 500 index fund, you shouldn’t be able to use it to bet Cowboys +6.5.”
Kirschner’s complaint stems from a Consumer Financial Protection Bureau report that found credit card issuers were treating credit card deposits for sports betting as cash advances.
Issuers that allow consumers to use their credit cards with sportsbooks are largely treating the transactions as cash advances. In a sample of credit card agreements from seven of the top issuers, each lists online gambling or legal wagers as cash advances, although two companies say they “may” decline internet gambling.
Cash advances can incur high fees as a percentage of the transaction amount and start accruing interest from day one. Cash advance fees often have a minimum charge of $10, making smaller cash advances particularly costly. This means that someone wagering $20 could face the same $10 fee as on a $200 cash advance ATM withdrawal. The most common cash advance APR in reviewed agreements is 30 percent which is charged even if the cardholder would typically not incur interest on regular purchases.
Credit card use data from Kansas and Ohio suggest that legalizing sports betting corresponded with an increase in cash advance fee incidence. Through the CFPB’s limited analysis of two case studies where the timing of legalizing sports betting lined up with the frequency of our data from major issuers, the percentage of credit card accounts with a cash advance fee spiked in the first month people could legally bet.
Disclosures made by credit card issuers about cash advance fees for online betting are not always clear or consistent. Consumer complaints provide evidence that some cardholders are caught off guard by cash advance fees and interest on sportsbook transactions. Cardholders cite a lack of transparency on the likelihood of fees from both sportsbooks and credit card issuers as factors increasing confusion around surprise charges.
For me, this, credit card companies charging exorbitant fees on gambling transactions, is the debate about credit card usage, not the unproven risk of increased gambling harm.
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Around the Watercooler
Social media conversations, rumors, and gossip.
As seen in the following tweets, sweepstakes continues to be a hot-button issue:
First, from Marc Edelman:
And from Jeremy Kudon, an X thread on the mismatched focus on the flaws of the legal industry vis-a-vis the unregulated industry:
And what are Kudon’s three major flaws?
“Flaw #1: Operating an OSB is cost-prohibitive in a number of states due to high tax rates (NY and IL) and the taxation of promotional credit (most states). This is a growing trend that will only drive more companies to these models.
“Flaw #2: OSB is still not legal in several of our most populated states (e.g., CA, TX, and GA,) and new entrants are not allowed in the 2 most populated legal states (FL & NY).
“Flaw #3: Enforcement in both legal and non-legal states has been haphazard or non-existent. In some instances, it’s a game of hot potato between the state AG and gaming regulators; in other instances, it’s just not a priority or takes YEARS for a state AG to act.”
Kudon went on to say:
Stray Thoughts
Alun Bowden recently made the point that “Gambling is a vice industry. It exists on the edges of acceptability and always has. I imagine it always will do to an extent. You can't just will it into being something else by confidently shouting loudly and proudly that it's entertainment.”
I wholeheartedly agree with Bowden’s disclaimer, too, “Quite obviously, I like the gambling industry. I think it provides genuine entertainment to lots and lots of people. I enjoy working in it, and there's a lot to like about it, but this loud and proud thing is faintly ludicrous to me.”
As I said in a previous post on this topic:
“Would you [I’m speaking to people in the gambling industry] encourage your children, family, or friends to take up gambling as a source of entertainment? More pointedly, would you encourage them to gamble for entertainment if they were in a rough patch of their life?”
“I love the industry and understand it isn’t going anywhere, but we need to be honest about what we are selling.”
I wrestle with this a lot. What exactly are we selling?
For a long time, I was on the “entertainment” bandwagon. I was way ahead of the industry in that respect. But more recently, I realized that while we are selling an entertainment product, the actual product we are selling, the differentiation brought about through legalization and regulation, is consumer protection. Vices are fun, but they are also dangerous.
Through regulation, we can:
Lessen (but not eliminate) social harms.
Ensure player funds are safe.
Validate the fairness of the games.
Provide customers with a way to file complaints.
Every missive from the industry seems to say the same things: “There is nothing to see here” and “Only we know how the industry works, so trust us.”
But the better message is, you could suffer financial harm from gambling, but through regulation, we can make sure you are getting ripped off or taken advantage of — at least that is what regulation is supposed to accomplish.