January 1, 2025, marked a watershed moment for Brazil’s betting industry. After years of operating in a grey market dominated by offshore operators and loosely regulated local outfits, the country now has a clear regulatory framework which has a zero-tolerance approach to unlicensed betting. Far from a routine policy update, Brazil is poised to become one of the largest regulated betting economies, with revenues forecast to reach $6.3 billion by 2038.
Kalshi's groundbreaking regulatory approval has positioned it as the first legal event contract exchange in the U.S., allowing nationwide betting while bypassing state restrictions. With backing from Charles Schwab and Susquehanna, it's poised to reshape the wagering landscape across elections, sports, and beyond.
Over the 12 months to 31 December 2024, the Waterhouse VC Fund delivered a gross return of 28%, reaffirming the strength of our multi-strategy approach. As our portfolio companies succeed and our investor base expands, the volume and quality of opportunities continue to rise. With stronger deal flow and deeper industry insights, we are increasingly the partner of choice for founders in the wagering sector.
Nigel Eccles has long been at the forefront of innovation in the wagering sector. His betting journey began in 2000 and exchanges would be the early focus of his career. After a period away from the industry, Eccles would setup FanDuel in 2009, revolutionising fantasy sports before its $4.2B acquisition by Flutter. Eccles stepped away from FanDuel in 2017 to return to early-stage startups, and has since co-founded five businesses. Today, he is driving the convergence of wagering and crypto through ventures like BetDEX and BetHog.
As the dust settles on the U.S. election, prediction markets have captured attention far beyond traditional wagering circles. Polymarket handled over $3.6 billion on wagers on the election outcome, accurately predicting not only the President but also the results in every swing state. Historically, many exchanges have struggled to sustain activity beyond major headline events, limiting their capacity to provide consistently actionable insights. Today, a new wave of platforms are looking to overcome these challenges.
Tabcorp has 805,000 active digital customers and over 4000 venues. The company has an overall Australian wagering market share of 34.6% and digital market share of 24.5%. In March, Tabcorp announced that Adam Rytenskild had resigned as CEO and managing director. A well-experienced industry leader with a history of product innovation, effective marketing and cost management could stimulate Tabcorp’s growth.
Sweepstakes casinos operate without real-money bets. Instead, they utilise a "freemium" approach. VGW is the dominant sweepstakes operator, with more than 90% market share, primarily through its Chumba Casino brand. VGW was founded by Laurence Escalante in 2010 and now has more than 1300 staff globally, with around 220 in Perth, Australia.
In every industry, there are prominent figures who stand out, and the wagering industry is no exception. This month, we shine a spotlight on three distinct leaders in the industry: Tim Heath, a crypto wagering pioneer; Peter Jackson, the CEO of Flutter Entertainment (listed on the FTSE100); and David Walsh, renowned as one of the world’s largest professional horse racing gamblers.
Whilst it is very difficult operationally and cognitively to win at betting, there are several groups that do so very successfully. We believe that professional betting is one of the most difficult fields in the world. The three keys to winning at betting are: making correct bet selection; betting at an attractive price; correctly staking (knowing how much to wager on each selection).
In 2023, Waterhouse VC generated a strong return of +39.5%, strongly outperforming the S&P500 (+24.8%) and the ASX200 (+7.8%). In 2023, there were two stand out contributors to the fund’s +39.5% performance:
Project Tennis - a professional betting syndicate founded by Tom Dry focused on tennis (first discussed in December 2022 and invested in on 1 July 2023)
Saintly - a crypto wagering operator and B2B platform (see more here) - position exited in August 2023.
Relying solely on their monopoly position is not an optimal strategy for monopolies, particularly in the context of increasingly accessible unregulated wagering. Unregulated wagering will compel monopolies to engage in at least some level of competition and they must deliver an attractive product offering and customer experience. As regulated monopolies face continued pressure from unregulated operators, they must consistently innovate to retain and attract customers.
Balancing gambling regulation/taxation is crucial to ensure a harmony between safeguarding consumers, thwarting criminal activities, and cultivating a market that is both fair and competitive. A well-crafted regulatory framework effectively considers the interests of betting operators, consumers, and the broader community.
‘Local heroes’ are wagering operators that have been successful in attracting customers from a single geography. The largest global operators, including Flutter, Kindred, Playtech (which also has a large B2B arm) and Entain, have effectively grown by acquiring local heroes and assisting them with expertise and technology. Most recently, in September, Flutter acquired an initial 51% stake in MaxBet, the second largest sports wagering and gaming operator in Serbia, for €141 million. Flutter has an option to acquire the remaining 49% of MaxBet in 2029. In the 12 months to June 2023, MaxBet had around 20% market share in Serbia and generated revenues of €145 million (44% from online).
With 214 million people and 217 indigenous languages in addition to Portuguese, Brazil is a large and complex market. It is one of the largest online sports betting markets in the world with 42.5 million unique users. Wagering operators generate significant revenues in Brazil by leveraging influencer marketing and numerous sports sponsorship deals. Brazil's Chamber of Deputies recently passed a gambling regulation act, allowing online gaming and omnichannel wagering, with operators able to buy three year licences. However, operators will be prohibited from offering bonuses and will pay an 18% tax on revenues.
