DraftKings, MGM set sights on Brazil's lucrative online gambling market

DraftKings, MGM set sights on Brazil's lucrative online gambling market
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As Brazil emerges as one of the world's fastest-growing gaming frontiers, heavyweights in the sports betting industry like DraftKings and MGM Resortsare eyeing entryinto the country's newly regulated online gambling market.

Since loosening its online gambling laws in 2018, Brazil has swiftly become one of the top 10 betting markets globally. The recent regulatory framework signed into law by President Luiz Inacio Lula da Silva has paved the way for further growth, establishing licensing fees and requirements for companies looking to offer fixed-odds sports betting and virtual online gaming services within Brazil.

US sports betting giant DraftKingsis among over 130 companies that have expressed interest in obtaining a Brazilian license, according to the country’s Finance Ministry. MGM and Hard Rock International, owned by Florida's Seminole tribe, are also part of this cohort.

We are excited to see Brazil pass online gaming legislation, and as one of over 100 companies who submitted non-binding expressions of interest, we are continuing to explore the potential of expanding into Brazil in the future,” Griffin Finan, Senior Vice President and Deputy General Counsel for DraftKings, said in an email statement, according to Bloomberg.

MGM confirmed its interest in Brazil during an earnings call in February. CEO Bill Hornbuckle highlighted the company's plans to examine joint venture partnerships in the country, anticipating Brazil's emergence as a significant market for both casino and sports betting.

However, as industry giants eye Brazil, smaller firms brace for consolidation in a sector currently comprising over 1,000 gaming operators. The new law imposes substantial licensing fees of up to 30 million reais ($5.9 million) and a 12% tax on gross gaming revenues, potentially pricing out smaller players.

Darwin Henrique, CEO of Esportes da Sorte, an existing online gaming firm in Brazil,expressed concerns that many serious players may struggle to afford the hefty license fees, jeopardizing their presence in the market.

Despite challenges, Brazil's allure as a lucrative market remains undeniable.The country's passion for soccer, coupled with a growing interest in foreign sporting leagues like the National Football League, underscores its potential for global growth in the gambling sector.

With total gross gaming revenues expected to reach nearly $5 billion within five years, multinational firms like Bet365, Entain and Betfair have already made significant inroads. However, the lack of regulation kept many foreign companies from formally entering the market.

The requirement for companies to establish a physical presence in Brazil signals a shift towards formalization in the market, attracting global players while potentially squeezing out smaller operators.

Wesley Cardia, President of Brazil's National Association of Games and Lotteries, views this development as a natural progression towards a more structured market. "It’s one of the biggest markets in the world, and as it gets regulated and becomes a formal market, it allows companies to enter and better explore the system,” Wesley said, as per Bloomberg. “And when you take those small and not well-regarded websites out of the market, you aggregate consumers to the big ones.”