At the beginning of this year, Brazil finally entered a new era of gambling regulation, and the online gambling market was launched with great fanfare. However, the legalization of physical casinos still faces significant controversy, although recent political and mindset changes indicate that momentum is increasing.
After years of delay, Brazil finally launched its legal online gambling industry on January 1, and it is widely believed that it could become one of the top three markets globally. Brazil has already paid over 2 billion Brazilian Reais (274 million pounds/326 million euros/352 million dollars) in online licensing fees, and the Brazilian economy will benefit greatly from licensed digital gambling.
However, the physical gambling industry also faces delays similar to those in the Brazilian online regulatory process.
Although the Brazilian Judiciary and Civil Committee approved the PL 2,234/2022 bill last June, legalizing physical casinos, bingo games, gambling, and horse race betting, the Senate vote has been postponed multiple times.
Nevertheless, the industry still generally believes that this land-based bill will eventually be voted on and approved this year, especially after Davi Alcolumbre, a supporter of gambling, was elected as the President of the Senate in February.
Alex Pariente, Senior Vice President of Casino and Hotel Operations at Hard Rock International, believes that Alcolumbre's appointment will help achieve the legalization of land-based gambling.
"Alcolumbre is not only an experienced senator but also very aware of the importance of legalizing land-based entertainment," Pariente explained. "Therefore, there has been good dialogue and cooperation between the parties. I believe we have a good will to advance this matter."
Ari Celia, Director of the Brazilian payment company Pay4Fun, is less certain.
"There are rumors that the government and the Senate are considering voting on this bill in the first semester," Celia said. "It's a political issue. It might take longer. Maybe it will happen. We don't know."
What makes this attempt at land-based legalization different?
Since 1946, gambling has been prohibited in Brazil. Although bingo was briefly legalized at the turn of the century, multiple attempts at land-based legislation have since failed.
With online gambling now licensed, industry insiders believe that physical gambling should join the regulated realm of digital gambling.
Hugo Baungartner, Chief Commercial Officer of local operator Aposta Ganha, who has been in the industry for 28 years, has witnessed countless attempts to legalize physical gambling in Brazil. However, he believes that online regulation has changed the mindset of Brazilians, and physical gambling legalization will ultimately be achieved by 2025.
"I think physical regulation will be introduced this year because the gambling industry in Brazil has become a reality, that's the first point," Baungartner said.
"Second, since 2010 or 2000, people's mindsets have changed. People are different now, they can understand. People travel the world, they see everything. Therefore, I think online regulation will also help politicians realize that the government has a powerful tool to control everything."
The fact is, even without regulation, physical gambling activities still exist in Brazil. Jogo do bicho is a gambling game, translated as "animal game," and despite being prohibited by federal law since 1946, it remains very popular.
"Jogo do bicho has a history of over a hundred years, so to say that it has only risen in the past decade or something like that is quite hypocritical," Pariente continued. "Regulating this industry is better than just knowing it exists.
"The public gets no protection because we don't know who is gambling, we can't control the flow of money or anti-money laundering. We don't even know who the customers are, but we know that something is happening there, and the government can't control it."
Promoting Brazilian Tourism
In addition to the enhanced player protection provided by regulation, physical gambling can greatly boost Brazil's tourism industry.
Pariente pointed out that Brazil's tourism industry is "stagnant," with about 6 million visitors per year. In contrast, the Dominican Republic, which is about 175 times smaller than Brazil in terms of land area, often surpasses the 10 million visitor mark.
Despite Brazil's heavy investment in hosting major sporting events over the past 11 years, including the 2014 World Cup and the 2016 Olympics, Pariente believes Brazil still struggles to attract foreign tourists.
Pariente said that Hard Rock hotels could help boost Brazil's tourism industry (Hard Rock has already opened several cafes in Brazil), while also creating job opportunities and further promoting the country's economic growth.
"Due to the large scale of investment, we are very keen to develop integrated resorts as projects that have a greater impact on the economy."
"Building an integrated resort that attracts both local and international tourists is very beneficial for achieving the government's goal of increasing tourism. Similarly, the massive investment in integrated resorts will create billions of dollars in job opportunities."
Celia agrees that land-based legalization will bring a welcome boost to the Brazilian economy, especially the tourism industry. "There are huge opportunities here," Celia said. "Brazil has many places, such as Rio de Janeiro, the northern tropical rainforests, and the beautiful beaches of northeastern Brazil, that can be improved through gambling.
"This is a major economic affair, and Brazil needs it now. Therefore, I personally think that this will also be a high-level discussion about tourism."
Online Effects
Will the discussion about online gambling boost hopes for the physical gambling industry? In the second half of 2024, Brazil's regulated online gambling industry will face pressure from the public and politicians.
Due to the uproar this has caused, the Supreme Federal Court held a hearing in November to rule on whether the online gambling law is unconstitutional.
The decision is expected to be made in the first half of this year, although few in the industry believe there is a significant chance of repealing this regulation.
Brazil's approach to regulating online gambling is somewhat unusual, prioritizing it over physical gambling, which Pariente describes as "building the roof before laying the foundation." However, since the beginning of this year, negative comments surrounding the online gambling industry and its regulation have subsided. This seems to make the legalization of physical gambling possible, although in Brazil, nothing is certain.
However, Celia is confident, claiming, "Honestly, I'm tired of this story because it's not true. Everyone knows that a small part of the population, less than one percent, is addicted to excessive gambling. But others, they have money, they know how to stop, they know how much they can bet.
"The good news is, since the regulated market started on January 1, I've talked to a lot of people. I feel this pressure is getting smaller, and I hope it will disappear in three months, six months, because it makes no sense. In my opinion, this prejudice against gambling is meaningless."
Brazil's Land Potential
From the first approval of online gambling legislation by the Brazilian Congress in 2018 to the final approval by the House of Representatives in December 2023, there has been a long delay, leading to a surge in gambling websites and companies operating in the gray market. As player preferences have shifted online, people question how much money legal physical gambling can actually make.
However, Pariente believes that an omnichannel approach provides an ideal solution to address the erosion phenomenon and eliminate concerns that Brazilians are reluctant to leave their homes to gamble.
"We have many physical casinos in the United States, and we find that we can find an omnichannel solution for our guests," Pariente said. "We find that customers do not stop visiting our physical casinos. By offering this mobile solution, we can retain brand customers.
"I don't believe one activity will have a destructive impact on another. I think it's a win-win for the company, and operators in Brazil will experience this too."
Since the ban on bingo games at the beginning of this century, even in physical betting, people's preferences have changed.
"Brazil was originally the birthplace of bingo games in the late 1990s, basically because we had laws for bingo games, not slot machines," Baungartner explained. "It's been 20 years since then, and people have changed. Those who used to play bingo games are now 50, 60, 70 years old. So everything has changed.
"Will bingo games be successful? I still think it's a process, and from my personal perspective, I think bingo games will be successful. Only bingo halls with bingo games will do well, so people can also play games different from slot machines, because for current Brazilians, slot machines are more complex, as they are less familiar."
Land-Based Casino Timeline
Baungartner and Pariente both believe that Brazil will achieve land-based gambling legalization this year, with the country's Minister of Tourism, Celso Sabino, previously predicting that the Senate will vote in the first half of the year.
Once the Senate approves the bill, it will be signed into law by President Luiz Inácio Lula da Silva, and there are indications that this will not be a problem.
Hard Rock will closely monitor the specific details of the regulation, and Pariente believes the company is ready to take action.
"As long as the laws and regulations are fair and just, the brand is ready to take swift action," Pariente added. "Having a solid legal framework, well-developed regulations, and the feasibility of the project is key, so we can implement a project that will last for decades in the country."
Pariente stated that any business Hard Rock Hotel Group enters in Brazil will be conducted cautiously to ensure compliance and ultimately help Brazil achieve the main goals of land legislation, such as promoting tourism and increasing the country's economic revenue.
"From a company perspective, we will continue to explore possibilities in the market, stimulating land-based opportunities through integrated resorts," Pariente said. "We will continue to explore different opportunities in the digital realm.
"But overall, we want to ensure that we fully comply with all the rules and regulations of the country and respect the process we are currently experiencing."
Cautiously Optimistic About Cannabis Legalization
The general consensus in the industry is that legal physical gambling will indeed return to Brazil this year, thanks to the new pro-gambling Senate President and the encouraging early signs shown by online regulation in alleviating people's concerns about gambling issues.
The momentum for the development of Brazil's gambling industry is indeed growing, although Pariente's metaphor of "roof before foundation" reminds us that nothing in Brazil is smooth sailing. However, it seems that previous failed attempts to legalize physical gambling will become a thing of the past.
Pariente is eager for this process to accelerate, especially to avoid gray market issues caused by online political delays.
"All these gray areas we encounter in the digital realm are things we might be able to avoid when assessing land-based laws," Pariente pointed out. "We have already seen the benefits of shortening the process. Besides, we will use all the tough discussions we have already had while regulating the digital world. So I believe the process will be much faster."
From an economic perspective, Brazil could benefit greatly, with undeniable potential for boosting the much-needed tourism industry and increasing job opportunities, especially as giants like Hard Rock are ready to take action.
Using lessons learned from online regulation, 2025 could be the year Brazil finally welcomes the full legalization of its physical gambling industry, consolidating Brazil's position as a global powerhouse in both digital and physical gambling realms.
