Brazilian President Lula has enacted a drastic measure that targets the country's burgeoning online betting industry. On Friday, just days before the upcoming general election, he issued a provisional measure that immediately bans the operation of online betting sites across Brazil.
Effective from October 6, all licensed betting websites will be blocked, and bettors will need to withdraw their funds by October 5. Those who do not comply will have their account balances credited automatically between October 9 and 14.
While this measure is provisional, it still requires approval from Congress within 120 days to be finalized or modified. The announcement caught the nearly two-year-old licensed betting sector off guard. According to Regulus Partners, the industry, valued at approximately $5.7 billion in net revenue, now faces an immediate shutdown. "What licensees are supposed to do with their Brazil-facing staff and long-term contract liabilities has not been made clear, and the president does not seem to care," the firm commented.
Legal recourse is a potential avenue for the industry as companies like Betano, which identifies Brazil as its largest market, are evaluating their options. The company is preparing for legal action to safeguard its rights concerning its five-year operating license. This legal challenge might gain traction, especially since abruptly banning a taxed product could threaten federal tax revenue. Regulus noted that no legally required justification for the ban has been presented.
In the first eight months of this year, the Brazil Federal Revenue Service collected BRL2.11 trillion ($411.2 million) in gambling taxes, up 12% from the previous year. Earlier predictions suggested the sector could reach a remarkable revenue of BRL16 billion by the end of 2026, with contributions to education, health, and sports in Brazil, giving further weight to arguments against the ban's constitutionality.
However, industry insiders are concerned that the legal process in Brazil tends to be slow and complicated. The regulated betting sector has faced numerous lawsuits since its inception in December 2024, including a notable case brought by a labor union that sought to classify the sector as unconstitutional. A separate lawsuit aimed to restrict municipal lotteries from offering digital sports betting, claiming it undermined the new betting market's financial stability.
In recent years, the sector has also been contested politically with several senators filing bills aimed at either banning betting or imposing strict regulations on advertising, amid rising public sentiment against gambling and concerns over addiction. Despite all the noise, Lula's threats to shut down the legal betting sector have intensified in the lead-up to the election.
Analysts from Regulus suggest that a complete ban is unlikely to remain in effect long-term but predict an 85% chance of a lengthy blackout. They caution that the economic damage from such a suspension could be significant. Following a Lula victory, the possibility of stricter regulations increasing the black market instead of safeguarding players is a concern.
Operators like Allwyn and Entain are already assessing the potential fallout from this provisional ban on their Brazilian operations. Although Allwyn has a 36.75% stake in Kaizen Gaming, which runs Betano, it indicates that its financial forecasts for 2026 may no longer apply under the provisional measures.
Furthermore, Betano is continuing its plans to enter four new markets in early 2027, despite the ongoing uncertainty. Entain, maintaining its overall earnings guidance, acknowledged that the ban could shift its forecasts toward the lower end of expectations.
Industry leaders have expressed their disappointment over the abrupt decision, emphasizing that Brazil, while only representing a small slice of certain companies like Kambi, was anticipated to be a significant market. Kambi CEO Werner Bercher estimated that Brazil's contribution is modest but highlighted the industry's collective dismay.
Some operators, such as Playtech, had significant hopes for the Brazilian market after securing tenders, while others had adopted a more cautious approach, citing the unpredictable regulatory environment. Flutter, which invested heavily in Brazil, warned of a potential $70 million revenue hit if the ban continues through the end of the year and noted that it has ceased operations in Brazil while exploring options for appeal.
