In an exclusive article for GMB, Roger Amarante, CFO at Salis Capital, highlights the importance of regulating the online gaming market in Brazil, which brings with it the incentive for responsible gaming practices, such as awareness and combating addiction. Moreover, he discusses the opportunities for safe and transparent growth of multinationals, such as the Flutter-NSX deal, which illustrates the potential for business and investments in the sector.
In recent years there has been significant progress in the online gaming market in Brazil and now we have reached a crucial moment which is regulation. This change tends to trigger several events, mostly positive, especially regarding the economy, the formal job market, and Responsible Gaming. We are talking about a sector that already generates, even informally, between R$ 120 and R$ 150 billion reais per year – the equivalent to 1% of the national GDP.
Job creation and professional prospects: the impact on the world of work
One of the main social transformations that regulation should bring is the creation of jobs. Currently, most of the major players in the sector are foreign companies, and because they cannot operate within the national territory, they do not have local employees and use very few service providers.
With regulation, these companies will start to operate regularly in Brazil, with a Brazilian CNPJ, bank accounts, operating licenses, and all other responsibilities and obligations that any company needs to have to operate in Brazil. This implies hiring people and consuming services.
It is estimated that between 2,000 and 5,000 jobs will be created in the sector, in addition to the generation of indirect jobs through suppliers and service providers, and these positions will consume capital that was previously 100% sent to the headquarters of the bets outside Brazil.
In other words, in addition to generating jobs, these will be financed with capital that did not circulate in the Brazilian economy. For these reasons, the argument that bets take money from other segments of the economy does not make much sense. The trend is, as already mentioned, that it will further increase the monetary volume in circulation.
Taxes: a concrete return for society
An important aspect of regulation also concerns the impact on tax collection. It is estimated that the regulated industry could contribute something between R$ 20 and R$ 50 billion to public coffers annually, directly helping in areas such as public health and infrastructure, in addition to the collection generated from the payroll of these companies.
This aspect is often overlooked by voices opposed to regulation, but it is extremely relevant: the legalization of the sector tends to guarantee a new source of revenue for Brazil, which will be accounted for in our GDP and will ensure more monetary circulation in the real economy.
Going beyond the collection of taxes by the Union, states, and municipalities, it is likely that there will be an optimization of the funds allocated by the bets for marketing campaigns, expanding from the current concentration of investment almost exclusively in football, to other activities such as, for example, social projects, culture, and urbanism, through sponsorship of films and theatrical plays, naming rights of stadiums, theaters, cinema halls, shows, and events aimed at the world of iGaming.
Responsible gaming: a consciousness that goes beyond business
One of the main opportunities – if not obligations – that regulation will bring is the incentive to responsible gaming. Awareness, regulation of advertisements, financial education, and combating gambling addiction will be extremely important points that players must observe, and they certainly will.
The implementation of an “ESG” agenda for the segment is a necessary and fundamental condition for the sector to ensure sustainable, lasting growth, and out of reach of attacks from certain segments of the real economy.
This also brings economic benefits for the companies in the sector: the Customer Acquisition Cost (CAC) - in the segment is extremely high, and thus ensuring a healthy and loyal active customer base is extremely advantageous. As the saying goes, it is cheaper to spend on prevention than on treatment.
Opportunities for foreign companies: growth with security
Brazil presents enormous potential with the regulation of the iGaming sector, providing a beautiful opportunity for foreign and national companies to expand their activities in an organized manner. With more than 200 million inhabitants, there is still a large market to be explored. However, the positive point lies in the governance and supervision guaranteed by regulation.
For multinationals managing operations on a global scale, the regulation of the Brazilian market represents transparency, predictability, and the chance to invest in a market that becomes more stable and reliable, which will facilitate the attraction of new investors and the establishment of strategic partnerships to strengthen the presence in the country.
A good example of this trend is the deal between Flutter and the NSX group. The amount paid for 56% of NSX was R$ 2 billion, which corresponds to an initial valuation of R$ 3.57 billion, and may still exceed U$ 1 billion according to the commercial conditions that govern the format of purchase of the remaining 44%.
A negotiation of this magnitude, in addition to helping in the pricing of the sector, marking market multiples (in this case, it was priced at an incredible 18x Ebitda), also moves various sectors of the economy: lawyers, accountants, financial advisors, auditing firms... And of course, millions of reais in taxes.
In summary: regulating iGaming in Brazil is crucial to strengthen this sector and bring tangible benefits to the economy and society as a whole. These measures contribute to the creation of jobs, the increase in tax revenue, and the promotion of responsible practices aimed at protecting consumers interested in this form of entertainment.
Roger Amarante
Partner / CFO of Salis Capital. Graduated in Statistical Sciences from the National School of Statistical Sciences – ENCE, with an MBA in Finance from IBMEC and postgraduate studies in Leadership from the Dom Cabral Foundation. He has more than 18 years of experience in the financial area, spread between capital markets and industries, with passages through XP Inc, L’Oreal, Vesuvisus PLC, and Monte Bravo, and entrepreneur as Co-Founder of the financial group Hub C.
