Brazil's Superior Electoral Court (TSE) confirmed the re-election of President Luiz Inácio Lula da Silva on Sunday, with Lula securing nearly 52% of the votes against Flávio Bolsonaro's just over 48%. The close result revealed a difference of slightly more than 4.3 million votes, highlighting the intense competition.
Lula’s campaign, marked by a firm stance against betting, set the stage for the introduction of Provisional Measure 1,394, which has effectively banned gambling in the country. Following his electoral victory, Lula may intensify his criticism of the betting industry. His campaign even framed the election as a referendum on the future of gambling in Brazil.
Starting Monday, the battle to overturn this provisional ban will unfold on two fronts: the Supreme Federal Court (STF) and the National Congress. Lula has emphasized that the ban aims to shield indebted families from the harms of gambling.
With his electoral win, Lula is likely to adopt a stronger position against gambling, despite acknowledging that tax revenue from the sector is crucial for state finances. In a promise made prior to the second round of voting, Lula declared that gambling would not be reinstated without recognizing that the ultimate decision doesn't rest solely with him.
Initial scrutiny of the provisional measure for constitutionality will take place at the STF. Legal actions challenging the ban have been initiated by various stakeholders, including football clubs. Justice Luiz Fux, who is overseeing the case, pledged a ruling following the end of the electoral process.
Fux, a respected constitutional expert, will assess if the measure violates existing contracts, leads to mass layoffs, or fails to eradicate gambling entirely. It is widely believed that no temporary measure can entirely eliminate gambling, rather, it may push gamblers towards the illicit market. Observers who are wary of the unconstitutionality of the measure anticipate that Fux may lean toward revoking it.
Despite this, the provisional measure has already significantly impacted Brazil's credibility as a destination for investment. It disregarded the investments made by operators who spent BRL30 million ($6 million) for five-year licenses and an additional BRL5 million in reserves. These businesses were forced to suspend operations for over a month, incurring losses of around BRL1.2 billion in revenue, leaving the question of who will absorb these losses.
Additionally, the government suffered a loss exceeding BRL400 million in tax revenue, covering various taxes linked to gross gaming revenue and corporate profits.
Compounding the situation, the licenses granted under the previous regulatory framework are set to expire this Sunday. Should the STF invalidate the provisional measure, the cancellation of these licenses will no longer hold.
The legislative battleground will continue in the National Congress, where a Joint Committee on Provisional Measure 1,394 has appointed 12 senators and 13 representatives. Six senators and seven representatives have been named as alternates, totaling a committee of 26 from each house. A president and rapporteur are yet to be designated, and the committee has not yet convened.
Congress has until November 25 to address the provisional measure, though an extension of an additional 60 days can be requested. From November 9, the agenda in Congress will be blocked until the provisional measure is acted upon.
In the previous term, Lula effectively utilized his influence to pass bills of interest in both the Chamber of Deputies and the Senate through negotiations with legislative leaders. However, with diminished maneuverability now, maintaining the provisional measure may be significantly more challenging. Even if it remains in effect, there’s little prospect for serious consideration by the November 25 deadline, increasing the challenges Lula will face moving forward. The PL party, aligned with his electoral opponent, has solidified the largest factions in both houses, presenting a formidable obstacle for the president.
Indications from Congress suggest that the gambling market may restrict its activities to sports betting and exclude online casinos. The pertinent issue now revolves around the licenses which became invalid on October 25. Congress will ultimately determine whether new applications for licenses will need to be submitted for the industry to resume operations.
