Brazil bites into Entain's forecasts, experts and operators do not think Lula's measure will hold

• President Lula da Silva’s abrupt decision to kill gambling overnight has had a ripple effect across the industry
• Entain has reduced its outlook towards the lower end of its guidance, cautioning that the decision by the President was made in isolation from the industry
• Experts believe that the measure has slim chances of becoming permanent, with trade groups already calling on the Supreme Court to intervene

The abrupt decision by President Lula da Silva to go after the online betting and gaming industry, which his government ushered in in December 2023, has caught many by surprise.

​While President da Silva has been saber-rattling on the issue, as a new election is looming and he is bidding for another stint in office, nobody expected him to preemptively use the kill switch, effectively halting all online regulated gambling in the country.

President Lula flips the kill switch - what does it mean?

Companies that have invested have responded. Ladbrokes and Sportingbet owner Entain has said that as a result of events in Brazil, its online sales outlook and earnings would be at the lower end of the guidance.

​Entain expressed disappointment with the decision, and the group noted that there has been no consultation with stakeholders to discuss what the effects of such a decision would be.

​There is a silver lining, as the measure by da Silva may not hold after 120 days unless Congress approves it. The measure applies with immediate effect, meaning that companies have not been able to accept new depositors since last week. However, the damage may have already been done, signaling to the gambling industry that Brazil would play politics when it comes to gambling.

Da Silva’s concerns, outside of his own political agenda, are not entirely unjustified, as Brazil has been struggling to deal with the surge in gambling-related problems. However, the immediate aftermath of the decision has been clear as to what would follow next.

​According to the Bet Legal platform, there has been a 141% increase in new and unregulated gambling websites following the announcement of Provisional Measure 1,394, or around 300 at the time of the report.

In other words, not only is Da Silva’s decision hurting the regulated industry, it may be inadvertently empowering the same bad actors that could fuel further gambling-related issues.

In Entain’s case, the impact translates into a net gaming revenue outlook between 4% and 6% and underlying earnings at the lower end of the guidance between £910m and £960m.

The group recently announced that it is cutting 400 jobs across its Customer Care roles but also left the door open to potentially further reductions, citing specifically changes in the United Kingdom, which have put further pressure on regulated operators.

The situation remains fluid - experts are skeptical the measure will hold

​Entain is also not the only company to have been impacted by the abrupt decision in Brazil. DigiPlus, one of many companies to have bet big on Brazil’s nascent iGaming market, has kept a rather more hopeful outlook, however.

The company noted that the "situation remains fluid and is not final," with relevant legislative and legal processes developing. DigiPlus, however, also noted that the developments would not end up having a material impact on the company’s financial or operating position.

​According to Regulus Partners, the chance of the measure actually remaining in place is only "5%," with the analytics company signaling confidence that it is highly improbable for Brazilian lawmakers to rubber-stamp the President’s spontaneous decision, which was carried out in isolation from the industry and even the legislature.

At the same time, several Brazilian trade groups have petitioned the Supreme Federal Court to intervene immediately and suspend the provisional measure to ban iGaming and interactive sports wagering.

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