Brazil now has, for the first time, a regulated betting market, with 67 authorized companies and over 130 brands. André Gelfi, president of the Brazilian Institute of Responsible Gaming (IBJR), an association that includes nine bets and holds about 75% of the market, predicts that in up to five years, the number of platforms in the country should drop by half, reaching about 30 companies authorized to operate.
"In my view, the Brazilian market cannot support 66 operators. If you consider that 50% of the market is in the hands of three or four companies, the other 50% needs to be divided among 55. This gives less than 1% market share for each. It's not sustainable to operate like this", says Andre Gelfi in an exclusive interview with EXAME.
Partner-director of the Swedish group Betsson in Brazil, Gelfi believes that the next two years will be marked by mergers and acquisitions of smaller groups, the fight against illegal houses, and the control of betting advertising on social networks, especially ads made by influencers.
"Often, the use of influencers in Brazil goes beyond the limit. The big issue is the subliminal message: 'I'm winning in such game and bought this car'. This may seem indirect, but it's what remains for the viewer. There is a huge responsibility in what these platforms and influencers communicate", he states.
Regarding low-income people using social benefits to gamble, Gelfi highlighted that the sector does not want customers who "do not have money left in their budget to spend on entertainment". He reinforced that the platforms would implement, "immediately", any prohibition that the government decides to establish.
"If the government decides to prohibit social program users, like Bolsa Família, from betting, we will implement it immediately and with satisfaction, because this would solve part of this problem", he says.
In the betting market, the IBJR is seen as a representative of foreign betting houses – a portion composed of companies with shares traded on stock exchanges around the world. Gelfi denies this claim and states that the group may seem like a "boys' club" due to the strict criteria for joining the association. "But the goal is to advocate for healthy practices and avoid systemic risks", he says.
"What we are doing is separating the wheat from the chaff. To be a member of the Institute, you have to follow clear rules and be a company that respects international regulations, because we represent not only in Brazil but also abroad", he asserts.
See the full interview with André Gelfi, president-director of the Brazilian Institute of Responsible Gaming (IBJR)
What does regulation represent for the sector?
It represents a milestone. Regulation is necessary because it brings legal security, consumer protection, and ensures that taxes are paid. We, at the IBJR, are focused on building a healthy, sustainable, and safe market. Without rules, serious companies lose to those that have no commitment to the industry and operate informally. Regulation is the only way to separate the wheat from the chaff.
The Institute has nine member companies. Why is the number so restricted?
We decided from the beginning that participating companies should follow strict criteria. The IBJR was created to represent operators that already have a history of operating in regulated markets and experience with compliance. Companies like Flutter, owner of Betfair, or Kaizen are major players that have a lot to lose if something goes wrong. They would not associate with a group that includes companies without these criteria.
Therefore, our focus has always been to gather operators who want to be recognized by a standard of excellence. In Brazil, there are many companies that are just starting, that do not even have the structure to operate in a regulated market. It is natural that our group seems like a "boys' club", but the goal is to advocate for healthy practices and avoid systemic risks.
Can the regulated market limit the operations of irregular houses?
Absolutely. And the Institute will be held accountable by its own members [who will ask]: "What are you doing to take down these companies that are not authorized in Brazil?" Whether from an administrative standpoint or by litigating, the Institute will put energy into combating the informal market, one way or another. For us, this is fundamental, both from a reputational and systemic risk perspective and from the standpoint of fair competition. How can a company, paying taxes and following all the rules, compete with another that does not pay taxes, that offers aggressive bonuses, that uses any influencer? It's impossible.
What is the expectation for the irregular platforms to be taken down? In an interview with EXAME, the Secretary of Prizes and Betting did not give a date.
My expectation is that 70% of this problem will be resolved in six months. After that, there will be that more difficult remainder. The most blatant, the large unauthorized companies, those will go out more quickly. The issue will be the long tail, the smaller companies, that change names, that are more difficult to track.
And regarding advertising with influencers? What has the Institute advised?
This is a critical point. We had an important report from Piauí magazine that dealt with the subject. Often, the use of influencers in Brazil goes beyond the limit. The big issue is the subliminal message: 'I'm winning in such game and bought this car'. This may seem indirect, but it's what remains for the viewer. There is a huge responsibility in what these platforms and influencers communicate.
The Institute has a Code of Conduct that addresses this issue. For example, no company associated with the IBJR can hire influencers with an audience predominantly under the age of majority. Another important point is not to suggest, directly or indirectly, that gambling is a financial solution. Our focus is to make it clear that gambling is entertainment, not a way to earn a living.
Can the informal market be combated only with regulation?
Regulation alone does not solve it. It requires monitoring and engagement from the entire chain, from payment platforms to influencers. Additionally, Brazil needs to strengthen education about what betting means. Betting is entertainment.
And about betting for low-income people?
If you do not have money left in your budget to spend on entertainment, you should not be betting. In other words, we do not want people who are compromising the basics of their income – food, transportation, electricity, water – to become customers. If this happens, it is not sustainable. We are creating more pain than entertainment for that person.
So, we are absolutely opposed to people in this situation compromising their resources with betting. Moreover, we do not consider betting a source of income. This is a very important point. Betting with the intention of making money is a risk, and the way this is communicated can end up conveying this mistaken idea. If you want to make money, you have to work, seek a source of income, because betting will not bring that at all.
How do you view a possible prohibition for beneficiaries of Bolsa Família?
If the government decides to prohibit users of social programs, like Bolsa Família, from betting, we will implement it immediately and with satisfaction, because this would solve part of this problem.
What happens with companies that cannot get a license? Will there be mergers and acquisitions?
We are already seeing this movement. There are many companies for sale. The email inbox of the group is full of "prospects", with people offering operations. An example was the purchase of Betnacional by Flutter, which should be completed soon.
In my view, the Brazilian market cannot support 66 operators. If you consider that 50% of the market is in the hands of three or four companies, the other 50% needs to be divided among 55. This gives less than 1% market share for each. It's not sustainable to operate like this. What will happen is that the smaller and less structured companies will be targets for mergers and acquisitions. This is a natural dynamic of a competitive market. In five years, I believe that the number of operators in Brazil will be much smaller, perhaps around 30 companies, which is still quite competitive.
Last year, we saw betting companies offer record sponsorship values for football clubs. What to expect from these values with the regulated sector?
What we will have is an accommodation of prices at a level probably lower than the current one. Today, we are coming from a dynamic where companies did not pay taxes in Brazil and the market was growing very rapidly. The agenda was about positioning, and football assets rose in price very quickly.
Now, with regulation, companies are paying a significant tax burden. If you consider the 12% federal taxes plus PIS, Cofins, and ISS, we are talking about something around 23% of the revenue. It's almost a quarter. Additionally, companies have to invest in structure in Brazil, with offices and local teams. All this impacts the budget. When you look at the price of Brazilian assets and compare with other countries, the values are already quite inflated. You already have Brazilian clubs with sponsorship contracts similar to those of Premier League clubs, which are global products, while the Brazilian Championship is a local consumption product. So, I believe the trend is for adjustment.
Do you believe that companies will experience growth in the coming years?
I believe so, but with reservations. We will go through a "belly", a period of decline in the growth rate. This happens because companies are adapting to the rules, there are fewer certified products available, and the validation of registrations is more rigorous. After this phase, the market should return to stable growth. Today, betting represents less than 0.5% of Brazil's GDP. In countries like Spain, the sector reaches 1%. This shows that there is a lot of room to grow, but in a responsible and sustainable way.
What lessons can we learn from international markets?
In Europe, we have seen important advances, such as betting limits, educational messages, and strict advertising rules. I think Brazil can learn a lot from these markets. On the other hand, Brazil is not behind mature markets in terms of regulation. The use of facial recognition, for example, was an innovation that even impressed Europeans. Here in Brazil, we are already used to it in banks and other services. Abroad, they took a while to understand, but they recognized that we are ahead in some areas.
What lies ahead for the Institute and the Brazilian betting market?
The idea of the Institute is that it truly be the association that represents the regulated industry in Brazil. You have a license in Brazil? The government is saying that this company is legitimate and will follow the rules. This is fundamental. What we are doing is separating the wheat from the chaff. To be a member of the Institute, you have to follow clear rules and be a company that respects international regulations, because we represent not only in Brazil but also abroad.
For example, you take a company like Flutter, listed on the New York Stock Exchange. Imagine a scandal in Brazil involving it. That would be a disaster. So, we prefer to work with companies that already have a long track record in regulated markets and that follow good practices. Of course, this generates criticism, such as the argument that it is a "club", but the focus here is to ensure that the regulated industry in Brazil is seen with credibility, both locally and internationally.
Source: EXAME
