Brazil betting applicant list shrinks as operators tap out before market launch

A number of operators in Brazil have dropped out of the application process for federal betting licences with the legal market’s launch less than two months away.

An initial deadline of 20 August saw 113 applications registered on Sigap, Brazil’s betting management system. Operators who applied ahead of that deadline are guaranteed to have their applications processed ahead of market launch on 1 January 2025.

Operators were still allowed to continue filing for licences after that August deadline, with the number of applications reaching 273 earlier this week.

Applicants dropping out of the process in Brazil

However, at least 20 operators have now withdrawn their applications in Brazil, with Super Group’s Betway the highest profile name on the list.

Among the others withdrawing from the licence application process alongside Betway are the likes of Arena Esportiva, AmuletoBet and Vera&John, currently owned by Bally’s Corporation.

In a conference call following the release of Super Group’s Q3 results on Wednesday (6 October), Super Group president and chief commercial officer Richard Hasson said the operator would focus on markets where it could see a way to generate returns following its launch.

“Brazil is obviously being spoken about a lot across the industry at the moment,” Hasson said on the call. “That’s a market where we are not currently proceeding in line with all markets that we look at.

“We want to ensure that we can identify the same path to profitability once we go live.”

A key theme of Super Group’s Q3 results was its success in Africa, a region that made up its largest share of revenue for the second quarter running. In response to a question from The Benchmark Company analyst Mike Hickey, Menashe said Super Group would concentrate on Africa rather than trying to compete against the likes of Flutter Entertainment and Bet365 in Brazil.

“[These competitors are] basically focusing on Brazil, which is why we’re not up to that,” he said. “so I think we picked our battle and that’s what you do.”

Why are operators withdrawing their licence applications?

The legal betting market is due to go live in Brazil on 1 January 2025 and operators have been getting their licence applications in since the Secretariat of Prizes and Bets outlined the requirements for authorisation in a four-stage rollout of regulation.

Normative Ordinance No 722 outlines a rigorous certification process with high costs involved, with companies needing to undergo regular audits and ongoing testing to maintain compliance.

Approved operators will have to pay a BRL30 million (£4.1 million/€4.9 million/$5.3 million) licence fee, which will allow for the operation of three skins per application.

The regulations in Brazil have caused concern in some quarters. Many local stakeholders have told iGB the costly technical and maintenance requirements, as well as a hefty licence fee, will deter smaller operators from entering the regulated market due to the operational expenses.

Others suggested the number of applications is misleading. They believe smaller operators, unable to afford the BRL30 million licence fee, applied to simply avoid enforcement action before the end of 2024. From 1 October those not active in the market, that have not applied for a licence, will be shut down by the authorities.

Is an M&A boom coming to consolidate the Brazilian betting market?

The financial barriers may yet see more operators withdraw their applications over concerns for the long-term sustainability and profitability of their activities in Brazil.

One way around those expenses for smaller operators could be M&A. Redirection International economist and partner Adam Patterson previously argued the high regulatory costs could lead to an M&A “boom” in Brazil, with larger operators snapping up locals with existing customer bases.

“The trend towards M&A activities is driven in part by the substantial regulatory costs associated with the licensing process, including authorisation fees that can be as high as BRL30m, technical certifications and tax obligations,” Patterson said.

“Collectively, these factors pose a significant challenge to the economic sustainability of small betting operators.”