As Brazil’s presidential election moves into a second round, the future of its licensed betting sector is uncertain.
The incumbent leader, Luiz Inácio Lula da Silva, recently enacted a provisional measure that banned licensed online gambling, just under two years after the market was established. Public backlash and political criticism prompted this swift action, which must now be reviewed by the National Congress before it can be made permanent.
In the first round of voting, Lula received 45.16% of the vote, while his opponent Flávio Bolsonaro, leader of the Liberal Party and son of former president Jair Bolsonaro, garnered 47.03%. Since neither candidate reached the necessary 50% threshold, a runoff is set for October 25.
Ramiro Atucha, CEO and founder of Atucha Strategic Advisory, expressed concerns that the prolonged election process could hinder efforts to overturn Lula’s ban. Following the announcement, Brazil's leading gambling associations appealed to the Supreme Federal Court to lift the prohibition.
Atucha warns that negative public sentiment towards betting, especially among evangelical voters, could lead both candidates to harden their stances against the regulated industry before the runoff. "Nobody wins votes defending bets in Brazil this month," he stated.
Bolsonaro's Liberal Party achieved a significant win with 121 out of 513 seats in the Chamber of Deputies, marking its largest bloc since 1990. Atucha believes this gives Congress the potential to oppose Lula's ban more effectively, as lawmakers might consider the longer-term economic implications. "Congress works on a longer horizon," he noted.
Legal expert Udo Seckelmann cautions that strong opposition to the ban does not guarantee congressional rejection. He explained that while the political environment shaped by the election results is crucial, the ban will still go through a process of legislative and judicial review.
Bolsonaro's victory might seem more favorable for the gambling sector, but it does not guarantee a return to the previous regulatory framework. Bolsonaro criticized Lula’s ban as “populist, hypocritical and politically motivated,” yet has previously indicated support for banning online casinos, allowing only sports betting.
Atucha underlined the complexity of the situation, noting that both candidates depend on evangelical support, which opposes gambling. He expressed limited optimism for the sector's recovery under either outcome, stating, "I have no hope of things returning to normal under Lula. If Lula wins, I see further radicalization in the populist direction," while holding out some hope for Bolsonaro.
The implications of the electoral outcomes stretch beyond the immediate gambling market. Investor confidence could be significantly impacted. Atucha highlighted that operators, faced with layoffs and investments in local structures, are desperate to rectify the situation to reclaim their losses.
Seckelmann echoed concerns about investor hesitance due to potential abrupt changes in regulations. "Sudden policy reversals increase perceived regulatory risk and may affect future investment decisions," he mentioned.
The industry largely agrees with Bolsonaro's assertion that Lula's ban was politically motivated. Atucha called it a short-sighted electoral decision that disregards the broader implications for employment and tax revenues.
Lula’s government was responsible for introducing regulated gambling, and the timing of the ban raises questions about coherent policy-making. Atucha suggested that a Bolsonaro administration could reinstate gambling regulations without needing to reverse its own policy decisions.
He cautioned, however, that while a quick restoration may be possible for stronger operators, smaller entities facing challenges could reach an irretrievable point during this interim. “The smaller ones that were already struggling are a different story. Many of them are going to hit a point of no return during these months,” he concluded.
