BRAZIL BETTING BOOM

BRAZIL

SET FOR BETTING BOOM

For almost a century, Brazil’s colossal population has been subjected to restrictive gambling rules, limiting gaming activity to a handful of modest pursuits. Native players could only engage in state-operated lottery draws, low-value scratch cards, and the odd horse racing wager at approved venues. However, since 2018, a new era of gambling liberalisation has been slowly ushered in.

Indeed, the Brazilian government’s landmark decision to overturn decades-old prohibitive sports betting legislation has catalysed this movement. Four years later, the Samba nation stands on the precipice of introducing further verticals to its suite of gambling options, including the establishment of casino games at licensed locations. Nevertheless, it’s the sports wagering sector that seems set for another huge shot in the arm.

Since the end of the last decade, potential suitors have been reluctant to become part of Brazil’s sports betting landscape. Given the lack of control and due diligence surrounding the marketplace’s compliance procedures, operators have steered clear, fearful of the legal risks that attach themselves to any unvetted environment. Nevertheless, many of the industry’s biggest players have descended on Latin America in recent times; and Brazil is no different. Flutter and Entain both enjoy huge commercial returns from their respective Brazilian enterprises. In 2021, Entain reported that it had nearly doubled its revenue return on the previous year, and was the chief contributor to funds generated outside its traditional markets of Europe, Australia and the UK. Peter Jackson, the CEO of Irish-based gaming giant Flutter, has recently declared Brazil as ‘a very significant opportunity’, and hopes to continue the firm’s current

run rate in this locality.

When officials in Brasilia finally do carve out the new legislation, it’s likely that a long list of prospective operators will be keen on entering the market. Indeed Entain, buoyed by its early performance in the region, has already declared its intention to apply for a sportsbook license. True, Martin Lycka, Vice-President of Entain’s Americas operations, has already gone on record to state that the company will look to acquire a license ‘as soon as it is available’. Current noises indicate that the regulation will impose a 19% GGR taxation rate on operators, which will facilitate a substantial volume of capital heading back to the state purse; a revenue source that presently eludes the government in the absence of proper market control. Yet, in this context, everyone’s a winner. European legislatures tend to position tax levies north of a fifth of adjusted gross revenue, and therefore Brazil’s initial taxation plan offers a more lenient platform to conduct operations. Therefore, operators will have the capability to not only boost commercial returns, but also protect profitability in the process.

If lawmakers can compose the new regulations prior to the original deadline set by the legislation pioneered in 2018, then stakeholders could be set for an eye-watering windfall. In arguably the most football-mad nation on the planet, the 2022 World Cup, scheduled for the end of this year, symbolizes a huge financial opportunity. If this target is hit, come December, a large swathe of Brazil’s 214m-strong population could be placing bets on its footballing superstars becoming world champions in Qatar. Moreover, H2 Gambling Capital, a leading gaming data and intelligence consultancy firm, in a recently conducted a study to illustrate the potential size of the Brazilian market in years to come. Based on the assumption that governmental officials sign-off industry control measures this year, H2 projects that sports wagering gross gaming revenue will register at an enormous R$3.7bn ($733m) by 2023, increasing to R$5.5bn ($1.16bn) three years later. Furthermore, the recent coronavirus pandemic has ironically served to further strengthen convictions in the chances of success. The accessibility of online gambling applications has been accentuated by the closure of retail and casino outlets amidst rolling lockdowns and social distancing protocols. However, in most cases, online handle figures outweigh the combined sum of deflected takings from land-based venues, and wagers placed through online sportsbook and gaming platforms. In essence therefore, a revitalized, Brazilian sports betting industry would join a global gambling marketplace currently subjected to a halo effect from a very unlikely source.

However, it remains to be seen whether ‘games of chance’ will augment the country’s overall gambling performance. Indeed, the legalization of slot machines, card tables, and bingo halls hangs in the balance. Despite the positivity surrounding its sportsbook vertical, efforts to emancipate casino-based gaming has struggled to gain political traction. State President Jair Bolsonaro has certainly not helped its cause, with the leader of the far-right Liberal Party not shy in expressing his condemnation of recently proposed gaming bills. There has also been opposition mounted by a powerful lobbying group of Evangelical Christians, who flag concerns in relation to problem gambling and addiction. Nevertheless, the lower chamber of the national congress has already voted to approve some form of gaming legislation. Should a successful bill come to fruition, there’s very little that Bolsonaro, in spite of his inevitable posturing and protestations, can do about it.

The concerns of Evangelical Christians, along with groups representing the dominant Catholic faith, have long held central importance to a deeply religious native population. Nevertheless, secularism has risen significantly since the onset of the twentieth century, as part of a general wave of more relaxed attitudes to societal change and modernization. Mass migration from rural areas into densely populated urban centres over the last fifty years has pre-empted a receptiveness to more progressive approaches. Gender rights are as advanced as anywhere across the Latin American theatre, with Brazil’s LGBT community now enjoying equal marriage rights. In a gambling context, if the general public’s engagement in sports wagering wasn’t enough of an indicator, we also see the vast majority of Brazil’s elite football clubs partnering with betting brands. All but one of last season’s Campeonato Brasileiro’s participants had some sort of sponsorship deal with a gambling operator, with six of these having sportsbook logos emblazoned across the front of their jerseys. Indeed, the winds of modernity have been blowing here for quite some time.

So, what does the immediate future hold? Well, this may rest on how the government intends to proceed with its licensing framework. It may favour a more ‘carte blanche’ stance, allowing an unrestricted number of operators to be validated for a gaming license, providing they of course suitably navigate any legal or regulatory checks. Conversely, a more selective process may be implemented, with rival concessionaires and platforms competing for a fixed number of accreditation slots. This decision will undoubtedly divide opinion across the marketplace, but one could be forgiven for assuming, at least from a commercial perspective, bigger will be better. One expert, Neil Montgomery, of the Montgomery & Associados legal group headquartered Sao Paulo, the financial capital of Brazil, has endorsed this view.

‘’The best thing for government is to work on scale and regularise as many operators as possible. I think that will generate more (tax) revenues’ said Montgomery, adding that embracing an open system of licensing governance would ‘be a big catalyst for growth’. Regardless of their decision, Brazil’s regulatory builders will most likely be formualting a set of rules that will help drive a phase of unprecedented growth. This is something in high demand amidst an economic crisis catalysed by an unyielding pandemic that has so far tragically claimed the lives of over 659,000 Brazilians.

Indeed, there may be an air of fragility around the country’s precarious financial status, but the possibility of a circa R$4bn injection of revenue into a bourgeoning local industry over the next twelve months will surely restore some confidence. As interested operators stand poised on the side lines, Brazil’s residents look forward to embracing a safer, fairer, and more transparent sportsbook sector.

Who knows?They may even get the chance to sit at a roulette table in the not-too-distant future……

How’s the Gambling Industry Responnded to The Ukraine Crisis

By Ryan Murray

President Putin’s illegal invasion of Ukraine has attracted widespread condemnation across most of the global community. Indeed, it did not take long before anger and dismay were converted into tangible, responsive action. Within hours of tanks rolling over Ukraine’s eastern border, a raft of economic sanctions against the Russian statewas put in motion. Governments rushed to stifle its powerful network of oilrich oligarchs, and big businesses withdrew their presence, goods, and services. Western financial support has also been fast-tracked to the front line, with armed forces personnel, and a substantial number of citizens, receiving military kit and weaponry. As Russian missile activity intensified and proliferated into more Ukrainian towns and cities, attention quickly cast to an unfolding humanitarian crisis of epic proportions, with an estimated 3.4 million Ukrainians being displaced to date. With shelled out homes and no guarantee of food or shelter, a growing contingent of refugee’s flood into neighbouring countries.

However, one thing more powerful than Putin’s onslaught has been the resolve of those subjected to the impacts of his murderous campaign. Regardless of being vastly outnumbered and facing an enemy hell bent on destruction, the Ukrainian people have been resolute in the defence of their territory. This has been supported in the West,

if indirectly, by copious messages of goodwill, defiant demonstrations of solidarity, and substantial charitable donation.

As referenced, many sectors have rightly adopted an anti-Russian stance, removing their assets from a country whose leader may yet be found guilty of breaching the Geneva Convention. But how has the gambling industry responded to the escalating conflict in Ukraine? This article intends to probe into how operators, stakeholders and punters, both inside and outside the immediate theatres of conflict, have reacted to Putin’s advance. Furthermore, whilst respecting the fact that the commercial consequences of war are always of secondary importance,

we briefly speculate on what this may mean for eastern Europe’s gaming markets moving forward.

The gambling industry is often maligned for its lack of compassion and commitment to social responsibility, and therefore its key stakeholders are often consigned to starting on the back foot. Regardless, few could criticize efforts leveraged towards this particular crisis to date. Through charitable endeavours, evacuation of employee personnel, and immense fundraising activity, the sector has demonstrated its ability to act with integrity, be empathetic, and prioritize welfare over wagering.

This activity may not come as a surprise to many in and around the industry. However, to superficial spectators and ill-informed bystanders, this feels like a significant step change. In fairness, the global gambling space has presided over some unsavoury events in recent months. Authorities in the semi-autonomous region of Macau, famed for its bustling strip of high-turnover casino’s, has had to contend with increasingly suspect Junket operations, a rise in money laundering cases, and illicit cross-border activity. The UK has seen several of its largest operators slapped with heavy fines in the last month, owing to the exploitation of punters during the height of the pandemic, and sending promotional messages to problem gamblers who had opted out of marketing channels. Furthermore, Australia is currently experiencing challenges in its casino sector, with fresh accusations consistently emerging in relation to its concessionaires’ compliance practices. Therefore, somewhat ironically, the conflict has provided an opportunity for the sector to showcase how it can support citizens, communities, and be a force for good.

In this regard, there’s certainly no shortage of examples. Perhaps the most inspirational actor in this space is Parimatch, a firm that was founded in Ukraine in 1994, but now resides in its Cypriot headquarters in Limassol. However, given the speed and sincerity of their actions, you would be forgiven for thinking they had never left their Kyivbased home. Unsurprisingly, the company still have a number of buildings on Ukrainian soil, including its main development centre located in the capital.

Parimatch originally pledged funds of UAH 30m ($1.03m) to support the Ukrainian Armed Forces, however, given the scale of monetary donations received to date, this target was -

Summarily doubled. Indeed, the operator has already spent UAH39m ($1.33m) on ammunition supplies and UAH3m ($102,500) on medical provisions. When generated, the additional income will be spent on essentials such as military radio sets, thermal imagers, binoculars, and first aid kits. Financial resource will also be channelled towards the evacuation process, with the introduction of meals for refugees and workers serviced by 24-hour kitchen facilities.

However, the sportsbook operator’s relief efforts have helped more than just those at the coalface. For those who want to leave the war-torn country, Parimatch has initiated several re-location programmes. Over 15% of Ukrainian-based colleagues have been allocated Head Office roles in Cyprus, and many have descended upon the company’s new office in Lviv, a major city in the safer, western end of the occupied state. However, support doesn’t stop there. The firm have also completely de-prioritized its normal commercial operations, and facilitated employees to take as much time away from the office as they need. This includes spending time on internally composed volunteer schemes, or even signing-up for combat. only one taking steps to aid Ukraine. A vast number of operators have piggybacked on the economic curbs leveraged by political leaders, and ceased trading in Russia. For some, this is a temporary suspension of operations, for others, it’s a wholesale withdrawal from the local market. To press, LeoVegas, bwin, bet365, DraftKings, and of course Parimatch, have all completely absconded, with many more no longer offering odds on Russian leagues and events. Less coverage, spectator interest, and sponsorship opportunity can only serve to help undermine Russia’s financial might, and distance the country even further from the global economic system.

However, perhaps the final word should be on the industry’s impressive contribution to the ‘Choose Love’ charity, which has been the collaborative focal point for many gambling companies throughout their respective campaigns. The organization has efficient communication channels with support groups on the ground, and can swiftly direct funds into the right hands. Throughout the conflict to date, Choose Love have connected to 23 official NGO’s and suppliers of aid, and has pledged $1.4m in support packages. Such has been the overwhelming response from the gaming community, organizers of the sector’s combined endeavours have extended the duration of their GoFundMe page. Indeed, the original target of £250,000 was chased down extremely quickly, leaving many to speculate on how far this charitable drive can go.

Despite a turbulent twenty-four months in more ways than one, the gaming sector hasn’t hesitated to throw itself into the sharp end of the current unfolding conflict. Many may often look on from a position of cynicism, but for those with insider knowledge, the true charitable credentials of the industry have never been in doubt.

As donations continue to roll in from far and wide, with punters and platforms alike putting hands in pockets, operators maintain their absence from Russian markets. In an atmosphere of human suffering and despair, the sector has shown a quality that many of its harshest critics assumed nonexistent. That is, the inclination to prioritize people over profit, and relief over revenue.

Putin’s demise may currently hang in the balance, but there is one safe bet available; the continuation of financial and emotional support to Ukraine’s battle-weary population.

Will the Golden State see sports betting

It’s perhaps an under-statement to suggest that the U. S’s fledgling sports wagering industry has been a solid success since its launch four short years ago. In 2018, a landmark order from the Supreme Court struck down archaic legislation, and sanctioned local state authorities to embrace sports betting verticals. Most didn’t have to be asked twice. Now, a colossal thirty-four jurisdictions (including the Washington D.C prefecture), have installed some format of legal sportsbook activity. The results have been staggering. Eight states have now surpassed a wagering handle threshold of $500m in a single month, and New York’s operators have generated over $4.5bn since its market’s inauguration on January 8th of this year.

However, potentially, thelargest heavyweight may be yet to enter the fray. California, the state with the highest population and most lucrative economy in the entirety of the United States, has flattered to deceive in its push for a piece of the sports betting pie. The Golden State finds itself wrapped up in a protracted battle between a vast array of stakeholders, as horse tacks, casinos, card rooms, sportsbook operators, and tribal gaming entities wrestle for superiority in a high-stakes, policy-making race. Given the potential earnings opportunity, it’s easy to see why rival groups are so intensely jockeying for position. According to a government-funded study conducted in collaboration with the American Gaming Association, Californian residents splurged $18.7bn through illegal, off-shore betting providers in 2016. This amount alone would be enough to give the Empire State a literal run for its money. Furthermore, highly experienced sports wagering lawyer, Daniel Wallach, of Wallach Legal LLC, has described California as the ‘’holy grail’’ of the sector. In referencing the lobby-

-ying campaigns initiated by prospective suitors, Wallach added, ‘’this is going to be a half-a-billion-dollar battle for control of the most lucrative betting market in the world.’’

The battle lines, it seems, were drawn two years ago. Californian lawmakers were on the cusp of introducing a wagering bill into the state in 2020, until internal feuds destabilized the process so substantially that the proposed legislation was thrown out. The contemporary conflict is being fought out by two major players, with a supporting cast constantly adding further fuel to the fire. The complexities of tribal gaming in the U.S regularly provide legal wrangling and dispute, as state legislature’s struggle to balance the sovereignty of native territory with the market forces of commercial gaming expansion. This is no different within the Californian landscape. A number of sports betting proposals have been tabled to date, with tribal groups particularly resolute in protecting their own bid. Having seen the hegemonic presence of sportsbook operators in neighbouring states, native gambling leaders are extremely concerned about the potentiality oflosing their monopoly on local markets. Clearly, now that the gambling theatre has also moved online, the scale of the financial opportunity has increased exponentially, and therefore so has the intensity of feeling. Indeed, three senior figures within California’s tribal community recently penned a call to arms, stating that a campaign loss ‘’would accelerate the legalization of online gaming by non-tribal interests, threatening the existence of Indian gaming as we know it’’. Since the passing of a 1998 amendment in the Californian House, tribes have enjoyed almost unfettered supremacy in the local gambling industry.

They argue that recent developments have put the constitutional essence of this law under threat.

Nevertheless, native stakeholders have reason to be optimistic. To press, only their proposal has gained enough traction to qualify for a pending November public vote on sports wagering legalization. Their interests have found a way to the ballot box via a gargantuan effort of advertising, canvassing, and, most importantly, a strong enough signature acquisition campaign. The irony is that any successful bids endorsed by commercial sports betting companies, a rival horse in the race, would require a portion of revenue to be siphoned off to tribal gaming enterprises. However, this would present a fairly measly, yet still relatively lucrative, cut of overall takings.

‘’The main fight for us is to ensure we keep the corporations out of state from coming in. That’s the best thing for all tribes here in California’’ said Jesus Tarango, who heads up gaming operations at the Wilton Rancheria tribal nation. In referencing the potential size of the prize if a ‘corporation’ deal was to take place, he stated that native groups ‘’may get a piece of it, but it would not be the same piece as if it was controlled by us and ran by us.’’

Indeed, the main challenge to tribal interests comes from a proposal formulatedby a large cross-section of North American gaming giants. This bill would not only factor in the above referenced re-direction of funds to native groups, but also provide a much-needed boost to state coffers. Operators have included a directive in their plan which promises to pledge a percentage of revenue to local housing and anti-homelessness efforts. This has resonated particularly well with city Mayors and politicians, who have found it difficult to facilitate consistent housing solutions for the most vulnerable during the COVID-19 pandemic. Nathan Click, a leading spokesperson for the plan, recently stated that, ‘’our initiative is the only one that would raise hundreds of millions of dollars each year in solutions to homelessness’’. Moreover, it’s wellknown that Californians give housing significant credence when considering their voting intentions.

Local cardroom operators have also sought to undermine tribal efforts, not least due to a concern over anticipated restrictions on their own gaming freedoms. Despite being very much a periphery figure in the debate, cardroom campaigners have still thrown an impressive $24m behind a counter-offensive, which could yet land a few punches. In addition to their nervousness of being subjected to further legal scrutiny sanctioned by native industry stakeholders, senior cardroom leaders also suggest that tribal exploitation of the ‘Private Attorney’s General Act’ may compromise the spending power of state authorities.

Regardless of who gets their proposal to the impending resident vote in November, there is no guarantee that the Californian electorate will approve any of the respective bills. Despite earlier statistics demonstrating a tangible local appetite for gambling, some surveys have determined that support for a state-wide sports wagering market is far from overwhelming. Indeed, a recent study found that 45% of its participants were in favour of introducing a sportsbook vertical, a little over a third were undecided, and 22% were against the concept altogether. Given the tally’s calculated by the AGA when reflecting on the state’s scale of illegal activity, it could be that California presides over comparatively

fewer players than other jurisdictions, but has a higher spend volume per head.

Nevertheless, it’s difficult to argue against the likelihood of a nascent sports wagering sector being established. The key question doesn’t seem to be so much about ‘if or when’, but more about what typeof market will emerge. Furthermore, given the sheer scope of financial opportunity, and the long-standing tensions between rival groups, one should not under-estimate the impact Californian legalization may have on states so far reluctant to jump on the sports betting bandwagon. Most analysts believe that the creation of a Californian marketwould pre-empt a domino effect, compelling the remaining sixteen states to swiftly embrace some format of sportsbook industry. Professor John Holden of Oklahoma University, held in high-esteem by analysts due to his contribution to the support given in the implementation of various states’ gambling legislation, has endorsed this notion. ‘’A lot of people basically think the rest of the country will legalize if California does’’ said Holden. He also suggested that sportsbook operators may well have the upper hand in the ongoing scrap for power, stating that ‘’they spend a ton of money lobbying in virtually every state, and they are significant market players too. Even in states where we do have exclusively tribal operations, a lot of those tribes are contracting with DraftKings or FanDuel to run their sportsbooks.’’ This closing remark isn’t something being currently explored by tribes indigenous to California, but there’s still a relatively long pathway ahead.

There are even some fears that come November, voters may end up with too many accredited options to consider, which may lead to some individuals reneging on a decision altogether. Commentators assert that this scenario would lead to further delays, as a lack of suitable support for any proposal would consign the process to the next election term – a conclusion that doesn’t really suit anyone.

Nevertheless, although California may be famous for its Hollywood films, Bel Air mansions, and celebrity residents, it’s latest blockbuster release may well be reserved for a fledgling gambling sector.