Much has been said about the potential of the Brazilian sports betting market and, therefore, its ability to generate funds for beneficiaries and the National Treasury – the numbers are the most varied, however they lack methodological foundation or, at least, their bases are not disclosed. Not to mention that they often mix values from casinos and slot machines, which are not legal in Brazil.
In this sense, our proposal is to offer an analysis based on the European sports betting market, comparing the Gross Gaming Revenue (or GGR, which is equivalent to the total bets minus the payment of prizes) where this modality is regulated, with the Gross Domestic Product (GDP) of each country.
A 2020 study by the EGBA (European Gaming and Betting Association), on the online market in Europe, allows us to extract that, on average, the sum of the GGR of authorized companies corresponds to 0.061% of GDP.
As a way of moderating the average value, we verified, from primary sources, how mature markets behaved, admittedly well regulated and inspected, such as Denmark, Spain and the United Kingdom, the latter being the main source of global benchmarking.
As a result, we found GGR participation values in GDP of 0.054% in Denmark and 0.059% in the case of Spain, which allow us to adopt the European average as a reference, since they cover a greater number of economic and social realities. It should be noted that in the Spanish case, data from the DGOJ (Dirección General de Ordenación del Juego) consider both online and physical sales.
According to the IBGE, the Brazilian GDP in 2022 was BRL 9.9 trillion (US$ 1.95tr). Thus, applying the average European percentage of participation of authorized companies, we can estimate a market of BRL 6.3 billion (US$ 1.25b) in revenue for operators in Brazil.
Going further, considering that the average payout (part of the value of bets destined for prizes) of these operators is 92.5% and applying the rates established in current legislation (Law 13,756/2018) for beneficiaries and payment of taxes and fees (Social Security, PIS, COFINS, IRPF, school entities, FNSP, sports entities and inspection fees), with 25 operators (excluding the amount paid for authorization, since we do not know it), we would reach the figure of BRL 1.2 billion (US$ 240m).
At the limit, thinking of matching the United Kingdom, an extremely competitive and mature market, with a large number of authorized companies, the GGR share of operators reaches 0.11% of GDP. In this case, applying a payout of 95.0% (competition tends to increase betting odds), 100 authorized companies and the other conditions listed, we would reach BRL 2.6 billion (US$ 515m) for beneficiaries, fees and taxes.
It should be noted that the values mentioned would only be reached after the authorization process of all companies, which implies the establishment of conditions (by means of publication of ordinances), deadlines for adequacy (opening of companies in Brazil, hiring of personnel, etc. .), submission and approval of authorization requests, which can take months, despite the fact that the formalization of this sector is fundamental.
In addition, it is essential that the authorization model to be adopted allows attracting a large number of operators – making it possible to achieve high channeling rates (more than 80% of bets are placed by licensed operators). It should be noted that the incidence of income tax on prizes, without the establishment of minimum limits, can lead the bettor to off-shore companies. Still, the application of high percentages on turnover, even if destined to legitimate beneficiaries, reduces the competitiveness of the authorized operator, compared to the illegal one.
Finally, although the collection motives are important for the Federal Government, with the transfer of resources for sport, security and education, regulation is necessary due to the possibility of monitoring operators and bets, mitigating money laundering risks, preventing ludopathy and placing bets by vulnerable people (underage in particular), as well as reducing sports integrity risks, which further reinforces the creation of conditions that allow the maximum number of companies within the legality.
Iuri Castro
Civil Engineer and Master in Marketing from the Federal University of Rio Grande do Sul. He is also a Doctor in Business Economics from the Autonomous University of Barcelona / Spain. He has 25 years of experience in the lottery market in Brazil as a product manager, marketing network, strategic planner and regulator.
Source: Exclusive GMB
