Brazil's President Lula has made a significant move against the nation's developing legal online betting industry. On Friday, just ahead of the general election scheduled for Sunday, he issued a provisional measure that immediately bans the operation of online betting sites in Brazil.
The order, effective from October 6, mandates that all licensed betting platforms be blocked, compelling bettors to withdraw their funds by October 5. If they do not, the platforms are obligated to return the balances held to registered accounts between October 9 and 14.
While this measure is provisional, it still requires ratification or possible amendments by Congress within 120 days.
The abrupt announcement has left the nearly two-year-old licensed betting sector in shock. Regulus Partners observed in its analysis, "an industry now worth about $5.7 billion in net revenue terms ($6.3 billion run-rate GGR Q1/26) is facing an immediate and total shut-down."
The firm also pointed out the uncertainty for licensees regarding their Brazil-facing staff and long-term contract liabilities, suggesting a lack of concern from the president regarding these issues.
In the face of this drastic measure, legal recourse appears to be a potential avenue of hope. Betano, which identifies Brazil as its largest market, has begun evaluating its options. The company stated it is preparing to initiate legal action to safeguard its interests based on its five-year operating license. This sentiment was echoed in a Monday update from part-owner Allwyn.
Regulus further noted that the immediate ban could threaten federal tax revenue, causing grounds for a court to overturn the decision. "Suddenly banning a product which is specifically and directly taxed clearly does threaten federal tax revenue and no legally required justification or mitigation has been made public," the analysts emphasized.
The Brazil Federal Revenue Service reported that BRL2.11 trillion ($411.2 million) in gambling taxes were collected between January and August, reflecting a 12% uptick year-over-year. The sector was projected to achieve record revenues of BRL16 billion by the end of 2026. This revenue supports various public sectors such as education, health, and sports, making a constitutional challenge more feasible.
The road ahead for the sector remains fraught with challenges. Brazil's legal proceedings are notoriously slow, and the betting sector has faced multiple lawsuits since its approval in December 2024, which Lula himself previously supported.
In 2025, a powerful labor union filed a suit at the Supreme Court seeking to abolish the sector, deeming it unconstitutional for various reasons. Despite the high-profile nature of the case, progress has stalled without resolution.
Another legal challenge involved municipal lotteries attempting to enter the digital sports betting realm, which raised concerns about the stability of Brazil's regulated betting market.
While public sentiment against gambling, coupled with political pushback, has lingered throughout the sector's brief history, the recent ban directly links to Lula’s re-election campaign, which has included threats to legalize the betting sector.
Regulus estimates only a 5% likelihood of a sustained full ban on legal betting. They project instead an 85% chance of a multi-month blackout, highlighting the potential for extensive damage to the industry. They warned, "There is also a clear danger that a Lula victory followed by a PM defeat will lead to tighter gambling regulations of the performative sort that drive the black market rather than protect players."
Allwyn and Entain have acknowledged the likely repercussions of the provisional ban on their Brazilian operations. While Allwyn holds a minority stake (36.75%) in Kaizen Gaming, its forecast for a 37% adjusted EBITDA margin in 2026 is now in jeopardy if the provisional measure persists.
"The exact impact would be dependent on, among other factors, the timing and effectiveness of measures to reduce certain costs that are not typically variable in the short term," the company stated.
Despite this setback, Betano is still pursuing plans to expand into new markets, with ambitions for four additional countries by early 2027.
Entain has maintained its FY26 group underlying EBITDA guidance of between £910 million and £960 million but suggested that the ban could place its forecasts at the lower end of this range. While the company expressed disappointment over the lack of industry consultation regarding the significant impact of the ban, it committed to complying with the provisional measure.
Commenting on the market's uncertain future, Kambi’s CEO Werner Bercher shared his disappointment, noting Brazil only contributes a small percentage to Kambi’s overall revenue, suggesting limited financial repercussions for the company.
Prominent operators initially anticipated significant gains from Brazil's regulated betting market. Playtech, for instance, was set to provide technology to the Brazilian state-owned bank Caixa for its betting operations. CEO Mor Weizer had previously expected this product to launch in 2027 but declined to comment on the current ban.
Some operators, however, have taken a more cautious approach. Entain’s CFO, Michael Snape, described the Brazilian market as "incredibly difficult and unpredictable," emphasizing the company’s focus on building a sustainable business rather than chasing immediate growth despite the challenges.
Flutter, which heavily invested in Brazil by acquiring local operator NSX for $350 million, expressed disappointment over the ban and announced the cessation of its operations in Brazil. The company warned that if the ban persists until year-end, it could face a $70 million revenue hit and a $20 million reduction in adjusted EBITDA.
