Earlier this month, Federal Supreme Court (STF) minister André Mendonça issued an injunction prohibiting Loterj (Rio de Janeiro State Lottery) operators from operating throughout Brazil, in addition to making the use of geolocation tracking mandatory for ensure that they could only accept bets within the borders of the state of Rio de Janeiro.
Mendonça rejected Loterj’s appeal against the decision on January 7, claiming that the state regulator disagreed only because of “mere disagreement with the appealed decision”.
Hazenclever Lopes Cançado, president of Loterj, believes that the STF’s actions put at risk the stability of the legal betting market in Brazil, which began on January 1st.
“Legal uncertainty in Brazilian betting exposes legal weaknesses, unfair competition and bureaucracy that disrupt the market and harm the economy,” Cançado wrote in an article for Migalhas.
“Unfair competition in the betting market in Brazil haunts entrepreneurship, weakens the national economy and has the support not only of informal [illegal] operators. But from the public administration itself, which systematically fosters legal uncertainty and, thus, encourages clandestinity.”
What is Loterj’s argument?
The reason for Loterj’s appeal was the perceived existence of “defects, omissions, obscurities and material errors” in Mendonça’s decision. The decision could cause a drop in tax revenue for the state and disruption of Brazil’s licensed betting sector, he argued.
Loterj also complains that the mandatory geolocation tracking was only created by Law No. 14,790 in December 2023, approximately six months after the publication of Loterj Accreditation Notice 01/2023.
The Accreditation Notice established that the “express declaration and consent of the bettor” was enough for bets to be considered within the limits of the state.
The state regulator claims that the Union misled Mendonça. This means that there was no pre-existing requirement for Loterj licensees to use geolocation technology.
“By the obvious logic and symmetry of the system, Loterj’s past acts, governed by its Accreditation Notice 01/2023, as they precede the act of the Executive Branch, which did not foresee any territorial restrictions, must be protected, right?”, says Cançado.
“That’s not what the Brazilian government thinks. Because, once again, it acts against the social values of free enterprise that supported the legalization of betting in Brazil.”
Threat of excessive regulation in Brazil
Operators licensed by Loterj contributed more than R$100 million (£13.3 million/€15.8 million/US$16.1 million) to the federal government in taxes.
Loterj believes that the STF’s decision will threaten these state contributions. But not only companies based in the state of Rio, companies based abroad and active in the Brazilian betting market will also suffer.
Currently, there are 14 companies with definitive licenses to operate in Brazil, in addition to another 54 with provisional authorization. These operators have a deadline of days to guarantee the completion of aspects such as complete certification of betting systems.
“The Union itself, using creationism and its own evil, with the support of the Judiciary, provides a truly hostile environment for legalized betting. Meanwhile, countless bettors based in tax havens and China, immune to Brazilian law. They continue to operate without submitting to the same conditions of competition, operating freely in the country. In other words, without collecting federal, state and municipal taxes, even representing tax evasion”, added Cançado.