As Brazil heads into the second round of its presidential election, the implications for the country’s online gambling sector remain uncertain. Following a provisional measure enacted by President Luiz Inácio Lula da Silva in late September, Brazil's licensed betting operations were banned. This decision came less than two years after the regulated market was launched, driven by public discontent and political pushback, and it will now be reviewed by the National Congress for potential permanence.
In the first round of voting, Lula finished close behind Flávio Bolsonaro, leader of the Liberal Party and son of former president Jair Bolsonaro, capturing 45.16% of the votes against Bolsonaro's 47.03%. With neither candidate reaching the necessary 50% threshold, a runoff is scheduled for October 25.
Ramiro Atucha, CEO of Atucha Strategic Advisory, expressed concern that the election’s second round could hinder attempts to overturn Lula’s ban on betting. In response to this ban, Brazil's two primary gambling trade associations have already urged the Supreme Federal Court to invalidate the prohibition.
Atucha pointed out that public sentiment regarding betting is currently negative, heavily influenced by the evangelical electorate, which is significant for both candidates. He anticipates that Lula and Bolsonaro could take increasingly hardline stances against the regulated gambling industry as the runoff approaches, stating, "Nobody wins votes defending bets in Brazil this month."
A notable development for the betting sector was Bolsonaro’s Liberal Party securing 121 seats in the Chamber of Deputies, the largest bloc since 1990. This increase could complicate Lula’s ability to maintain the betting ban, as lawmakers might consider the broader economic implications of such a decision.
“The people most exposed to that short-term, evangelical-driven pressure are the two presidential candidates, while Congress tends to consider longer-term consequences,” Atucha noted.
Udo Seckelmann, a partner at Bichara e Motta Advogados, cautioned against assuming that strong opposition to the ban would equate to congressional pushback. “The first-round result will likely shape the political environment around the debate, but the key point is that the ban is subject to congressional review and judicial scrutiny,” he explained. He added that the discourse is evolving, reflecting a debate on whether prohibition or regulation better protects consumers and curtails illegal operations.
A Bolsonaro victory might suggest better prospects for Brazil's gambling sector, yet it wouldn't guarantee a return to the pre-ban landscape. Bolsonaro criticized Lula’s ban as "populist, hypocritical and politically motivated," but he too has previously pledged to ban online casinos, limiting gambling to sports betting.
Atucha observes that both candidates rely on the evangelical vote, which opposes gambling, yet he sees Bolsonaro as being slightly more amenable to pre-existing agreements. "If Lula wins, I only see further radicalization in the populist direction, and decisions against operators will likely strengthen," Atucha posited. Meanwhile, Seckelmann stressed the unpredictability of a future government’s policies, noting competing pressures such as consumer protection versus the need for regulatory stability and economic growth.
The outcome of the election could significantly impact investor confidence in Brazil’s gambling market. Despite their willingness to return, operators face challenges in rebuilding trust after having invested heavily in licensing and infrastructure only to see their efforts dismantled. Atucha emphasized the difficulty in restoring international investors' trust regarding Brazil's institutional reliability and its commitment to agreements previously established.
Seckelmann echoed these concerns, warning that abrupt shifts in regulations may deter future investments, as companies evaluate whether Brazil’s legal framework can ensure long-term stability before engaging.
The perspective that Lula's ban was a strategic election move is gaining traction within the industry. Atucha believes that the decision was shortsighted, potentially resulting in long-lasting repercussions. He noted that Lula's government, which had initially ushered regulated gambling into Brazil, now finds itself enacting a ban less than two years later. "There is no coherent policy behind that but the electoral calendar," he said.
This situation places Bolsonaro in a position to reinstate the gambling market without reversing policies from his own administration. However, Atucha warned that the damage could already be profound for some operators, noting that while a swift return might be a chance for successful businesses, smaller operators may face insurmountable challenges in the current climate.
For operators affected by the ban, finding a resolution quickly could be critical, as some may reach a point where recovery becomes impossible regardless of the election outcome.
