Gambling technology providers IGT and Scientific Games have withdrawn from the process for the establishment of Brazil’s new national instant lottery operation, citing failure to secure a contract with their local partner.
The two companies further noted that their decision to step back was also prompted by a recent ruling issued by Brazil’s Supreme Court that is set to drastically change the country’s lottery landscape.
IGT and Scientific Games teamed up to jointly participate in a bid for Brazil’s first national instant lottery concession (LOTEX Concession). The two companies were announced as the winning bidder in October 2019.
After they were awarded the concession, they were required to satisfy certain conditions that were precedent for the execution of the concession agreement. That had to happen by September 21, 2020.
IGT and Scientific Games informed the government of Brazil that it was imperative that they had a signed distribution agreement with CAIXA Econômica, the country’s largest network of lottery retailers, in order to ensure the success of Brazil’s national instant ticket business.
Successful Launch Relies on Retail Network Partnership
CAIXA’s network comprises more than 13,000 lottery retailers around the country and IGT and Scientific Games said they believed the successful launch of their instant lottery operations relied heavily on their agreement with with that massive retail network.
IGT and Scientific Games held discussions with CAIXA over their distribution agreement over a period of seven months. The parties eventually completed their contract negotiations successfully.
However, although they agreed on the final terms of the contract more than two months ago, CAIXA was unable to authorize the contract’s execution by the concession deadline last month. In addition, IGT and Scientific Games requested an extension of the deadline for meeting all the necessary conditions, but their request was not granted.
IGT and Scientific Games said that a recent ruling of Brazil’s Supreme Court that could change significantly the way lottery products and services are provided in the country was the other reason that prompted the two companies to reconsider their presence in the local market.
On September 30, the Supreme Court ruled that the federal government’s monopoly over lottery was unconstitutional. That ruling paved the way for Brazil’s 26 states and one federal district to each develop their own lottery.
IGT and Scientific Games said that following the ruling, “prudent capital management dictates that we withdraw from the process and re-evaluate the business case of implementing a lottery operations model in Brazil.”
However, it seems the two companies are not completely abandoning the idea of possibly entering Brazil since they noted that if the federal government grants the previously requested extension so that CAIXA can execute their contract “because of the high contribution potential of this venture”, they will explore the possibility for re-engaging in the process of setting up a national instant lottery games operation.
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