The cost of Brazil's betting ban spreads through the supply chain

Brazil's regulated betting market was shut down overnight by Provisional Measure 1.394 (MP 1.394), signed on 25 September. After Judge Luiz Fux suspended such cases nationwide, operators have been unable to challenge the ban in lower courts since Monday, 9 November. The burden of the ban has not fallen on operators alone. Payment providers, technology suppliers and contractors have also been affected.

Marlon Tseng, co-founder of payment company PagSmile, said some operator clients have left tax invoices unpaid since the ban. An executive at an international technology supplier, who did not want his company's name disclosed, said suppliers face tax invoices worth millions that will never be paid. Tseng said PagSmile has not yet decided on layoffs, but that it cannot indefinitely sustain a structure built for a market that no longer exists.

Costs continue even after operations have stopped. Under the law, companies must keep their records for five years and continue reporting to the Secretariat of Prizes and Betting (SPA) within the Ministry of Finance. According to a study prepared by consultancy LCA for the Brazilian Institute of Responsible Gaming (IBJR), these obligations keep system and compliance costs running.

Individuals working in the sector are also at risk. Many workers operate as contractors through their own companies, a structure known as PJ. A manager at an operator that recently exited Brazil said PJ contracts were cancelled after the ban despite their termination clauses, with companies treating the ban as force majeure. He believes this has happened at several companies, but that very few people are willing to say so openly. In his view, workers are caught between demanding what they are owed and the possibility that the market reopens.

The scale of these losses was not calculated before the ban took effect. Less than 24 hours before the law was published, the SPA stated in its response to a freedom of information request that it had no study on the ban's impact. It had made no estimate of Sunday revenue, tax revenue, sports sponsorships, bettors moving to illegal sites, or the effect on public health. The SPA stressed that this was not a matter of confidentiality and that no assessments had been made at all. The same day, the Ministry of Justice classified the law's preparatory documents as secret for five years. The Ministry of Finance told NEXT.io that the SPA provided technical input and recommendations on the regulatory and implementation aspects of the law, but did not answer whether any impact study had been carried out.