According to estimates, sports betting in Brazil will generate about R$12 billion (US$2.34 billion) this year, and more than 36 million people will visit Brazilian betting sites.
According to the Ministry of Finance, Brazil will require sports betting operators operating in the country also to have their headquarters in Brazil.
Regulatory mechanisms will also be implemented to curb fraud and manipulation of gambling results.
A law passed in 2018 allowed betting operators to operate in South America’s largest country, and they have since surged in popularity, but the government says lax regulation has allowed the business to grow untaxed and lawless.
“The regulation will require betting companies to be based in Brazil,” the ministry said in a statement, since most of them are based abroad, as well as “improve supervision, collection, and dialogue with representatives of the sector.”
It was unclear whether opening a subsidiary with local headquarters for a foreign-based company would be enough to meet the requirements.
The measures, which include taxing companies, are part of an effort announced last week by Finance Minister Fernando Haddad to increase tax revenues and offset increased social spending.
The ministry “hoped the reform could help crack down on money laundering, manipulated results, and punish those responsible.”
Two ministry sources said the measure could relieve public budgets by about R$2 billion to R$8 billion (US$385 billion to US$1.54 billion) annually, although calculations have not yet been completed.
The ministry did not provide details on how the company would be taxed or the tax rates.