As Brazil approaches the second round of its presidential election, the implications for the country’s regulated online gambling sector are becoming increasingly uncertain. The incumbent president, Luiz Inácio Lula da Silva, recently enacted a provisional measure banning licensed online gambling, a surprising move given that the regulated market had only been operational for less than two years. Public backlash and political opposition appear to have influenced Lula’s decision to impose the ban, which will now go to the National Congress for ratification.
In the first round of voting, Flávio Bolsonaro, the leader of the Liberal Party and son of former president Jair Bolsonaro, secured a slight edge with 47.03% of the votes, while Lula garnered 45.16%. Since neither candidate surpassed the 50% threshold necessary to win outright, a runoff is scheduled for October 25.
Ramiro Atucha, CEO of Atucha Strategic Advisory, expressed concerns that the election proceeding to a runoff could adversely impact efforts to challenge Lula’s ban on online gambling. Following Lula's announcement, Brazil's two leading gambling associations petitioned the Supreme Federal Court to annul the decision.
“The public’s current attitude towards betting is largely negative, and the evangelical segment of the electorate holds significant influence over both contenders,” Atucha noted. “In this context, it’s likely both candidates will intensify their opposition to the regulated sector and online casinos as they approach the runoff. No one gains votes in Brazil by championing gambling this month.”
A major development for the gambling industry occurred when Bolsonaro's Liberal Party gained a substantial number of seats in the Chamber of Deputies, winning 121 of 513, marking the largest bloc since 1990. Atucha suggests that this increased representation could hinder Lula’s ability to maintain the ban, as lawmakers may consider the broader impacts of legalizing gambling on the economy over the long term.
“Congress operates on a longer timeline than the two candidates under immediate pressure from evangelical groups,” he stated. “This newly empowered Liberal Party may take a more favorable view of the signed agreements and the implications of lawsuits.”
Udo Seckelmann, a partner at Brazilian law firm Bichara e Motta Advogados, cautioned against assuming that Congress will decisively reject the ban. The outcome of the first round will likely affect the political dynamics surrounding the debate, but the prohibition remains subject to legislative review and judicial assessment. “The current discourse increasingly focuses on whether regulation or prohibition is more effective in safeguarding consumers and curtailing illegal operations,” he explained.
If Bolsonaro wins the presidency, many speculate that it would benefit the gambling sector. However, Atucha pointed out that while Bolsonaro criticized Lula’s ban as "populist and hypocritical," he has also previously advocated for limiting gambling to sports betting only.
“He depends on the evangelical vote just as much as Lula does, and that group is against gambling,” Atucha mentioned. “However, Bolsonaro might be more open to pre-established agreements. I have little hope for a return to normalcy under Lula, as his victory is likely to result in further populist measures against operators.”
Despite potential optimism surrounding a Bolsonaro win, Seckelmann warned it would not guarantee a swift return to the regulated market. Any future administration, regardless of leadership, would need to balance consumer protection with investment concerns, tax compilation, and addressing illegal operators.
The outcomes of the elections may have enduring implications for Brazil’s gambling landscape. Atucha noted that operators have significant stakes in the market, having invested BRL30 million per license and employing local staff who are now facing layoffs. “What they truly want is a quick resolution allowing them to recover their investments,” he asserted.
Seckelmann echoed these sentiments, adding that regulatory disruptions could deter future investments in Brazil. “Operators may adapt to existing policies, but abrupt changes elevate regulatory risks and could impact future commitments from new investors,” he stated.
Industry experts believe that Bolsonaro's claims regarding Lula’s ban being motivated by electoral considerations resonate with many stakeholders in the gambling sector. Atucha described the ban as a short-sighted decision that could have long-term repercussions.
“Polls indicated public sentiment on betting, making the timing of the ban a clear electoral play,” he commented. “This decision disregards key considerations such as tax revenues and the contractual obligations negotiated by the industry, revealing a populist impulse without a coherent policy.”
Ultimately, Atucha observed that regardless of the election outcome, the harm inflicted upon certain operators may be irreversible. “For those who were thriving before the ban, there remains a chance for recovery,” he said. “However, many smaller operators that were already struggling will reach an unsustainable point during this interim period, and no administration will be able to reverse that trend.”
