Municipal bets could make a big impact in the economy of Brazil generating more than US$ 2 billion in revenue

Municipal bets have the potential to generate over R$ 11.6 billion (or US$ 2 billion) per year for Brazil’s federal government. The number was obtained by Leme Consultores after a survey commissioned by the National Association of Municipal and State Lotteries (Analome), and published by Estadão newspaper. 

The research estimates that almost R$ 8 billion (or US$ 1.4 billion) could come from small and medium-sized operators that are currently outside the formal system because they are unable to bear the costs of the federal license. Cities, in theory, could grant “municipal licenses” which would be cheaper and would encourage these companies to enter the formal system. And, with legalized operations, the companies would start paying taxes, which would go to the federal government.

“The time has come to ensure respect for municipal autonomy and disseminate good practices regarding the regulation of lottery activity in Brazil,” said Sofia Signorelli, Analome’s legal director, in an interview for Estadão.

Brazil’s Current Betting Legal Framework

In 2018, Brazil approved Law No. 13.756/2018 and legalized fixed-odds sports betting as a lottery modality. This law allowed both online and physical operations, but left the implementation up to the Ministry of Finance, now under the Ministry of Economy. In 2023, the country’s government approved Provisional Measure No. 1.182/2023 and the subsequent Law No. 14.790/2023, which began to concretely regulate online sports betting and iGaming, and established operational guidelines and tax structures.

Today, under federal law:

• Operators must be authorized by the Ministry of Finance.
• A licensing fee of R$ 30 million allows operators to function for five years.
• Operators can only work if they have a Brazilian legal entity with headquarters in Brazil.
• The federal government imposes a 12% gross gaming revenue (GGR) tax on betting operators.
• Bettors are subject to a 15% income tax on net winnings above R$ 2,112.

Municipal and State-Level Involvement

While federal law dominates gambling regulation, Brazilian states and municipalities retain authority over state lotteries, after a 2020 Supreme Court decision that removed the federal monopoly. As a result, several states, such as Rio de Janeiro, São Paulo, and Minas Gerais, have launched their own state lottery systems.

However, municipal governments have not been widely included in this framework. Local governments typically lack the legislative clarity and financial means to establish betting systems independently. Municipal bets, understood as betting schemes operated or licensed by city governments, remain legally ambiguous and practically non-existent.

What Are Municipal Bets?

Municipal bets could include:

• Local event betting, for example on municipal sports tournaments, cultural events, or local talent shows.
• Small-scale digital lotteries hosted by the city.
• Bingo, raffles, or keno-style games tied to local infrastructure or charity funding.

These systems would be modeled to stay within legal bounds, avoid competition with federal and state lotteries, and be customized to local populations. Furthermore, municipal bets could be administered directly by city governments or through private-public partnerships with regulated operators.

Economic Potential of Municipal Bets

Among the economic potentials of municipal bets are:

• Boosting Federal Revenue via Shared Taxation

Although the bets would be managed at the municipal level, the federal government could impose a national tax rate or revenue-sharing model. For instance:

• A fixed federal participation fee or royalty from licensed operators.
• Inclusion of municipal operators under the existing 15% tax on player winnings.
• A small revenue-sharing agreement where a percentage of gross revenue from municipal betting is transferred to the federal treasury.

This could parallel the model used in federal-state lottery revenue-sharing agreements in countries like the United States and Germany. If just 10% of Brazil’s 5,570 municipalities implemented such systems and generated an average monthly GGR of R$ 200,000, the annual revenue would be R$ 133 million per year. This is a conservative estimate, assuming modest uptake and minimal stakes. Realistic expansion and better digital adoption could triple or quadruple these figures.

• Stimulating Local Economies

Legalized municipal betting could also:

• Fund public health, education, and culture via earmarked revenues.
• Support local job creation in digital operations, regulation, and compliance.
• Encourage financial inclusion, particularly in underbanked areas, through digital wallet and micro-transaction adoption linked to betting apps.

Advantages of Legalizing Municipal Bets

Some of the main advantages of legalizing municipal bets include:

• Decentralized Revenue Generation

By empowering municipalities to operate their own betting services, the national government can encourage decentralized, bottom-up revenue generation. Cities would have the incentive to innovate, market, and grow their platforms, reducing dependency on federal transfers.

• Improved Regulatory Oversight

Currently, much of the betting in Brazil occurs through unlicensed or offshore operators, with billions of reais flowing out of the country. Legalizing municipal bets could localize compliance and enforcement, allowing municipalities to control operations and crack down on illegal betting. Also, it could ensure better data collection, enabling policymakers to track gambling trends and reduce problem gambling.

• Integration with Smart Cities and Digital Governance

Municipal betting platforms could be integrated into broader smart city initiatives, using digital wallets, local identity verification, and e-governance platforms. Municipalities like Curitiba or Campinas, known for digital innovation, could pilot such systems and provide templates for national rollout.

In an interview for Estadão, Menndel Macedol, tax expert, said that “ regulating bets at the municipal level is recognizing an economic reality that already exists and that has even been the subject of federal regulation. Denying municipalities this power violates the principle of autonomy and delays the use of a legitimate source of public revenue. It is an intelligent, modern measure that does not increase the tax burden on those who already contribute”.

Challenges and Considerations

Despite the potential of municipal bets, some hurdles remain:

• Legal reforms: current federal legislation does not explicitly allow for municipal betting systems. A new law or amendment would be necessary to authorize cities to license and tax betting.
• Regulatory capacity: smaller municipalities may lack the expertise to regulate betting operations. Federal or state-level support could be essential.
• Gambling addiction concerns: as with all gaming expansions, responsible gambling programs and public health monitoring must accompany any legalization.

Final thoughts

Legalizing and regulating municipal betting in Brazil could unlock a significant, currently untapped source of revenue. By developing a framework that allows local governments to create and license betting operations, under national oversight and revenue-sharing models, the federal government can enhance its fiscal base while empowering municipalities. In a country where informal betting is widespread and digital adoption is accelerating, now is the time to move toward a regulated, inclusive, and mutually beneficial municipal betting ecosystem.

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