As Brazil approaches a second round in its presidential election, the future of the country's licensed betting sector hangs in the balance. Recently, incumbent president Luiz Inácio Lula da Silva enacted a provisional measure that banned online gambling, a move that sparked significant political debate and public scrutiny only months after the market had opened for business.
This ban has raised eyebrows within the gambling industry, particularly given that it has been less than two years since Brazil legalized regulated betting. Lula’s decision is now set to be reviewed by the National Congress, where lawmakers will ultimately decide if the ban will become permanent.
In the first round of voting, the Liberal Party’s Flávio Bolsonaro garnered 47.03% of the vote, slightly ahead of Lula, who received 45.16%. Because neither candidate secured over 50% of the votes, a runoff will take place on October 25.
Ramiro Atucha, CEO of Atucha Strategic Advisory, expressed concern that the election's movement to a runoff might hinder efforts from the betting sector to reverse Lula’s ban. In response to the presidential announcement, Brazil’s primary gambling trade associations appealed to the Supreme Federal Court for the ban to be lifted. Atucha stated, “Public opinion on betting is strongly negative right now, and the evangelical vote carries a lot of weight for both candidates.” This could prompt both candidates to adopt stricter positions against regulated gambling, especially online casinos, in the run-up to the runoff.
The recent elections also saw a notable victory for Bolsonaro's Liberal Party, which won 121 of the 513 seats in the Chamber of Deputies, marking its largest bloc in over three decades. Atucha contended that this notable representation could enable lawmakers to consider the long-term implications of the ban rather than solely succumbing to short-term pressures from the electoral base. He asserted, “Congress works on a longer horizon.”
Legal expert Udo Seckelmann cautioned against overestimating the potential for a shift in congressional opinion regarding the ban. “The first-round result will likely shape the political environment around the debate,” he explained, highlighting the complex interplay between regulation and consumer protection as the driving factors behind a potential policy shift.
While a Bolsonaro win may seem to favor the gambling sector, it is not a guarantee that previous policies will be reinstated automatically. Bolsonaro criticized Lula's ban as “populist, hypocritical and politically motivated,” but he has also expressed intentions to limit gambling to sports betting only. Atucha noted, “He [Bolsonaro] relies on the evangelical vote as much as Lula does, which is openly against gambling.” Atucha believes there may be a chance for recovery under Bolsonaro but remains skeptical about Lula’s potential approach to the industry.
The repercussions of the election outcomes might extend beyond immediate policy changes. Investor confidence is crucial for the regulated market’s return, but recent disruptions could have lasting effects. Atucha emphasized the need for swift restoration of operations, particularly for those companies that have invested significantly in the industry. “They paid BRL30 million per licence,” he said, stressing the urgency of regaining prior stability.
Seckelmann echoed these sentiments, suggesting that abrupt policy changes could deter future investments. “Sudden policy reversals increase perceived regulatory risks,” he noted, which might lead potential investors to approach Brazil’s market with caution.
The industry widely views Lula’s ban as politically motivated. Atucha argued it was a short-sighted decision that could have long-term implications. He described the ban as a populist maneuver ignoring its potential consequences, including lost tax revenue and job cuts.
He remarked on the irony that it was Lula's own administration that had previously regulated the market. If Bolsonaro secures the presidency, Atucha believes he might have the ability to reinstate the sector without needing to dismantle prior agreements.
However, the damage may already be done for many smaller operators, who could face insurmountable challenges regardless of the election results. Atucha concluded, “Many of them are going to hit a point of no return during these months, and no government is going to be able to undo that.”
