The surprise reelection of Luiz Inácio Lula da Silva in Brazil’s presidential elections could have a dramatic impact on efforts to ban gambling in Latin America’s largest economy.
Lula, the incumbent, defeated Flávio Bolsonaro on Sunday with a narrow margin of about 51.8% of the vote, according to The New York Times. In the run-up to the election, Lula announced he intended to ban online sports betting and casino games across the country. It became a central theme of the campaign, part of a wider Lula push to position his policies as protection for indebted Brazilian households.
Bolsonaro called the move “populist,” and many companies that participated in Brazil’s legal betting economy were banking on his winning to preserve the legalized industry. Now it appears attempts to reverse Lula’s ban will need to come via the country’s Supreme Federal Court (SFC) or its national congress.
Companies that would ultimately be impacted by a long-lasting ban include Entain, Bet365 and Flutter, the parent company of FanDuel. Genius Sports and Sportradar, which provide data and underlying tech to sportsbooks, could also be impacted. Though global equities markets are very much reacting to Lula’s reelection—trading was halted on Brazil’s stock exchange—none of those gaming stocks appear to be dramatically impacted as of Monday morning.
“We believe the result of the election, or the potential demise of the online betting industry, was baked into stocks when the original ban was put in place,” Jordan Bender, equity research analyst at Citizens, said in an email. “The gaming sector is trading as though it is guilty until proved innocent, with stocks pricing in the risk of sports betting and iGaming being removed from the market. Over the last month, there have been theories that Congress will not sign the bill into law, that sports betting would survive while iGaming would be banned, and that both industries would be banned. We will have to wait and see.”
According to Regulus Partners, Brazil’s gaming industry was worth about $5.7 billion in annual net revenue at the point of Lula’s September announcement. The Brazilian government estimated its households spend around $11.57 billion (60 billion reais) annually on online betting.
Lula has been emboldened by what he says is evidence that gambling is contributing to nationwide debt and overwhelming public support for the restriction. According to Reuters, recent polling revealed roughly 75% of Brazilians supported a complete gambling ban.
In smaller measures taken recently around the globe, the English Premier League’s ban on gambling companies as front-of-jersey sponsors took effect this season. Denmark is prepping a ban on gambling ads during sports TV broadcasts, and starting next year, the WTA and ATP Tours will reportedly force tournaments that take gambling money to contribute 10% of their payments toward programs that mitigate the negative impacts of sports betting.
“We believe that if sports betting is allowed to come back, stocks would react in a positive manner, but we do not believe any investor at this point is going to give these companies the benefit of the doubt,” Bender said. “Additionally, if any form of gambling comes back, operators are going to think extra hard about the investment they are willing to put into the market, given how it has played out in just two years.”