Proposed GGR tax hike raises concerns
One of the major challenges identified by Hostench is a potential increase in the Gross Gaming Revenue (GGR) tax, which could jump from 12% to 18%. A tax increase of this magnitude could materially affect profitability for licensed operators in Brazil, Hostench noted. The proposed hike is raising questions about the timing and scale of future investment in the country.
The shadow of the black market
Beyond taxation, the prevalence of unregulated gambling remains a pressing issue. Hostench warns that the size of the black market undermines the legal sector’s margins and overall attractiveness. Illegal gaming continues to impact growth and pricing for licensed operators, he said, highlighting the structural challenges the industry faces.
Cirsa’s cautious approach to acquisitions
Despite these obstacles, Cirsa is actively evaluating potential acquisition targets in Brazil. However, Hostench stresses that any deal would depend on improved regulatory clarity and market conditions. There are opportunities in Brazil, but any move must be measured and carefully timed for him. This approach underscores a broader industry trend of prudence in a volatile market.
Regulatory risk and corporate strategy
The CEO emphasizes that corporate strategies must account for exposure to illegal gambling and enforcement strength. Changes such as raising the minimum gambling age could further squeeze profits for operators. Companies considering M&A must evaluate how regulatory and market risks could affect valuations and deal structures.
Valuations under scrutiny
M&A activity in Brazil will likely require adjustments in expectations. Buyers may seek higher premiums to compensate for risk, while sellers might delay transactions until the regulatory picture becomes clearer. Understanding regulatory risk is key to structuring any successful deal in this market, Hostench explained.
Opportunities remain, but patience is required
Despite these challenges, Hostench remains optimistic about Brazil’s long-term potential. The country’s growing gaming population and digital adoption offer significant upside for operators able to navigate the regulatory landscape effectively. Cirsa is monitoring opportunities closely, ready to act when conditions align.
A growing, complex market
Brazil’s legal gaming sector is expanding rapidly, but illegal operations continue to erode potential revenues. Effective enforcement and a balanced tax framework are critical to attracting both domestic and international investment. For M&A to gain momentum, these conditions must be addressed.
Strategic insight for investors
Hostench’s perspective provides a roadmap for investors and operators. Companies entering or expanding in Brazil must assess exposure to black-market activity, understand the regulatory environment, and anticipate tax changes. Strategic patience and market insight are essential for sustainable growth.
Looking ahead
As Brazil’s gaming authorities consider changes to taxation and regulation, the market watches closely. Cirsa’s measured stance reflects the balance between ambition and prudence, illustrating how top operators are preparing to capitalize on opportunities while mitigating risk. The coming months could define the trajectory of M&A activity in one of Latin America’s most promising gaming markets.
Source: GMB
