Stake is set to launch a legal challenge following a Brazilian court's recent reversal of an injunction that temporarily shielded the company from a betting ban. This decision comes after President Luiz Inácio Lula da Silva imposed a ban on licensed betting operations in late September. Initially, Stake was granted a favorable ruling allowing them to continue activities until October 25, but the next day Judge Luis Antonio Johonsom di Salvo, head of the Federal Regional Court of the 3rd Region (TRF-3), suspended that injunction, reinstating the ban.
Represented by Brazilian law firm Bichara e Motta Advogados, Stake's partner Udo Seckelmann confirmed their intention to contest the reversal. "Of course, this is not over," Seckelmann stated. "This is just one setback. We are drawing up some strategies to overturn this. We’re going to challenge this decision for sure. We have two possible strategies and are analyzing which one would be best to file."
While specific grounds for the challenge remain undisclosed, Seckelmann emphasizes the broader implications for Brazil's betting industry. He noted, "If we get a positive decision in the next couple of days, maybe other operators will get that too. So we know the degree of responsibility that we have for the whole industry."
Stake's arguments center around the significant investments operators made to enter the Brazilian market, which included a BRL30 million ($6 million) licensing fee and a financial reserve of at least BRL5 million. Additionally, international companies like Stake were required to establish a physical presence in Brazil. Seckelmann contends that the reversal jeopardizes the legal stability that companies relied on to enter the market. "[The] government, you regulated the market, you established all the rules, you established that based on these rules we’re going to pay you BRL30 million plus BRL5 million of financial reserve to exploit this activity that is legal and regulated," he said. "And from one moment to another, before we reach the two-year landmark of this license that would be valid for five years, you say now it’s over; that activity is prohibited."
Further complicating the situation is the negative public perception surrounding betting in Brazil, particularly following a significant media narrative linking gambling to familial debt. Seckelmann argues this narrative conflates licensed operators with illegal gambling. He highlights that the ban lacks substantial evidence connecting licensed operators to the issues with addiction and debt. "The reasoning that was raised by the federal government to issue the provisional measure was not grounded on any relevant studies and statistics that showed the regulated market in Brazil was causing all these problems," he asserted. "If you analyze what they are saying in terms of addiction, it becomes clear that the real issues stem from illegal gambling, which has been on the rise in Brazil."
The judicial decision to overturn Stake's injunction came at the behest of the Attorney General’s Office (AGU), which claimed the injunction provided Stake an unfair advantage over other operators. Seckelmann accused the AGU of strategically targeting Judge Johonsom di Salvo, known for his pro-government stance. "They knew that if they brought this for this president to decide, he would decide in favour of them," he indicated. "If you analyze this decision, he doesn’t raise any arguments; it’s essentially a political decision."
The impact of the betting ban is already being felt, with a partial survey by the National Association of Games and Lotteries revealing that over 3,500 workers in Brazil's betting sector have lost their jobs since the imposition of the provisional measure. As both legal and public challenges unfold, Stake considers it critical to secure a return for the licensed betting sector, even if in part.
In addition to Stake's case, Brazil’s Supreme Federal Court (STF) is also facing a challenge filed by two major gambling trade associations seeking to have the ban overturned on constitutional grounds. However, this resolution is not expected until after the second round of elections scheduled for October 25. Seckelmann mentioned the need for an injunction to maintain Stake's operations during this extended deliberation. He expressed concern about the deteriorating situation: "Our operation is frozen. We have to terminate several contracts, we have to fire a lot of people. We are losing money here…We have a lot of losses, and this will be irreversible. We won't be able to reverse everything that’s happening."
