A handful of Brazilian operators have withdrawn out of the federal betting license application process, with the legal market set to open in less than two months.
An initial deadline of August 20 saw 113 applications lodged on Brazil’s betting management system, Sigap. Operators who applied before the deadline are guaranteed to have their applications approved before the market launch on January 1, 2025.
Operators were still able to file for licences after the August deadline, and the number of applications reached 273 earlier this week.
Applicants drop out of procedures in Brazil
However, at least 20 operators have withdrew their applications in Brazil, with Super Group’s Betway topping the list.
Arena Esportiva, AmuletoBet, and Vera&John, which are currently owned by Bally’s Corporation, are among the companies that have withdrawn from the licence application process alongside Betway.
In a conference call following the release of Super Group’s Q3 earnings on Wednesday (6 October), Super Group president and chief commercial officer Richard Hasson stated that the operator will focus on markets where it could create returns after its launch.
“Brazil is obviously a hot topic in the industry right now,” Hasson remarked during the call. “That is a market in which we are not now acting in accordance with all markets that we examine.
“We want to ensure that we can identify the same path to profitability once we go live.”
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Super Group’s Q3 results highlighted its performance in Africa, which accounted for the majority of its sales for the second quarter in a row. In response to a question from The Benchmark Company analyst Mike Hickey, Menashe stated that Super Group would focus on Africa rather than competing with Flutter Entertainment and Bet365 in Brazil.
“These competitors are basically focusing on Brazil, which is why we’re not up to that,” he told me. “so I think we picked our battle and that’s what you do.”
Why are operators abandoning their licensing applications?
The legal betting market is set to launch in Brazil on January 1, 2025, and operators have been submitting license applications since the Secretariat of Prizes and Bets defined the prerequisites for authorization in a four-stage regulatory rollout.
Normative Ordinance No. 722 establishes a stringent certification process with significant expenses, with enterprises required to undergo frequent audits and continuing testing to ensure compliance.
Approved operators will be required to pay a licence cost of BRL30 million (£4.1 million/€4.9 million/$5.3 million), which will allow them to operate three skins per application.
Some people have expressed concern about Brazil’s regulations. Many local stakeholders have warned that the costly technical and maintenance requirements, as well as the high license charge, will discourage smaller operators from entering the regulated market due to operational costs.
Others claimed that the amount of applications was deceiving. They think that smaller firms, who cannot afford the BRL30 million licensing price, applied to avoid enforcement action before the end of 2024. The authorities will shut down those who are not operating in the market and have not sought for a licence beginning October 1.
Is there going to be an M&A boom that will consolidate the Brazilian betting market?
Financial hurdles may cause additional operators to withdraw their applications due to worries about the long-term viability and profitability of their operations in Brazil.
M&A could help smaller operators avoid these costs. Redirection International economist and partner Adam Patterson previously stated that high regulatory costs could lead to an M&A “boom” in Brazil, with larger operators acquiring locals with existing user 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 told the BBC.
“Collectively, these factors pose a significant challenge to the economic sustainability of small betting operators.”
This situation is getting already out of hand, and Brazil betting companies might suffer in the end.
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