Betting: the State as a service provider
Betting: the State as a service provider

After decades since its ban, betting has never been closer to a second regulation in Brazil. The sector is one of the fastest growing worldwide, standing out on all continents due to its potential to generate significant revenues for their respective regions.

But for a strong betting segment, it is necessary to have an organized structure focused on the functioning of this market. The Brazilian State is increasingly interested in “gaming services” and their benefits for the entire country.

ConJur recently published an article – written by Cristiano Heineck Schmitt – that reports on the role of the State as a supplier and explores some issues in the iGaming sector in Brazil.

Check out the full article on betting games in Brazil

1) Brief overview of games in Brazil

The exploitation of card games, casino, horse racing, lotteries, sports betting, has always moved high figures, attracting legitimate or even illegal interests, the latter of which result in tax evasion, violence, money laundering, manipulation of results , etc. But the fact is that, by providing high profits to the gambling administrator, the State also became interested in “gaming services”.

In the Civil Code, Law nº 10.406/02, the gambling and betting contract is dealt with in an incipient manner between articles 814 to 817. The reduced legislative devotion generated the figure of tolerated or permitted gambling, that is, that which does not have a norm itself, but it is also not vetoed by criminal legislation, for example, which represses gambling.

The Brazilian Civil Code only generated some legal outlines for sparse sports betting modalities, not being able to cover most of the gaming operations in the country. It is a legal transaction incapable of being demanded in court, but which, once paid, became unrepeatable.

In the set of gambling games said to be prohibited in Brazil, the respective practice is typified as a criminal misdemeanor, being provided for in article 50 of Decree-Law No. game of chance in a public place or accessible to the public, with or without payment of entry: Penalty – simple imprisonment, from three months to one year, and a fine, from two to fifteen contos de réis, extending the effects of the conviction to the loss of furniture and decorative objects from the place”.

Also, in accordance with paragraph 2 of the said rule, “whoever is found participating in the game, even if via the internet or any other means of communication, is subject to a fine of R$2,000 to R$200,000. or gambler”. And that same article 50, in its §3º, establishes what are considered to be gambling games: “a) the game in which the gain and loss depend exclusively or mainly on luck; b) the bets on horse races outside racecourse or any place where they are authorised; c) bets on any other sporting competition”.

Obviously, Brazilian legislation does not punish or prohibit all gambling. There is a choice about the modalities that will be the object of state repression. And these choices are, in practice, specific, since the text of the criminal law is generalist. Thus, in Brazil, we have “Legal Gambling” and “Illegal Gambling”.

A game that appears as one of the most played, even if it takes place outside the law, is the “jogo do bicho”, which shows that the penalty of restriction of freedom, provided for illegal gambling, is negligible, as well as the criminal prosecution around it. There are no correct data, not least because the jogo do bicho is an illegal practice, so its revenue is not declared. In 2014, the Fundação Getulio Vargas estimated that this type of bet raised between BRL 1.3 billion and BRL 2.8 billion, figures that some considered underestimated.

Casinos, for example, which had already been allowed in Brazil, were prohibited by Decree-Law 9,215, of April 30, 1946, signed by President Eurico Gaspar Dutra. At the time (and perhaps even today this view is still maintained), it was understood that the practice of gambling with money bets was morally degrading to the citizen. Perhaps one of the biggest reasons for banning gambling in Brazil was the idea of ​​the addiction that could be generated by it, making the individual a pathological subject, who would sacrifice all his assets and that of his family in gambling.

It is strange to understand that someone could suffer personal degradation playing in casinos, bingos, but would keep his dignity intact if the whole week he made bets in state lotteries. The presence of the State, in this sense, would beatify the game in Brazil, which is actually a typical fairytale magical thought.

The State itself, in its three spheres of activity, is an excellent explorer of gambling. Caixa Econômica Federal, the largest public bank in Brazil, which has the form of a public company, belonging to the Federal Indirect Administration, explores several betting contests, and does so over several decades. In this sense, as an example, there is the case of Mega-sena, Lotofácil, Quina, Lotomania, Timemania, Dupla Sena, Loteca, Dia de Sorte and Super Sete.

This set of possibilities, added to the obstacles to the practice of the game in Brazil, makes it quite noticeable that the State wants the supremacy of a widely profitable market. The sector is so profitable that in 2021, the Caixa Econômica Federal raised R$ 18.5 billion in all types of lottery games.

As Aloísio Zimmer Júnior points out, “each type of game of chance has, in Brazil, its own more or less troubled history”. The author points out that, in terms of lotteries, a first attempt to systematize a legislation that was sparse, came in 1932 with Decree 21.143. The perspective, at the time, was to fight the criminal organizations that formed with the exploitation of illegal gambling. Thus, lotteries were classified by the said Decree (Article 20) as a public service granted by the Union and the States. Years later, Decree nº 204/67, still in force, guaranteed the Union the exclusive exploitation of lotteries, leaving to the states only the lotteries that were already operating.

Brazilian state lotteries monthly consume part of the budget of Brazilian families, with income above two minimum wages, generating an almost automatic behavior, which lasts practically the entire life of the subject, who believes that one day he will be contemplated. Basically, it is a social custom for Brazilians to bet on Caixa Econômica Federal lotteries.

Therefore, a very clear conclusion is that the Brazilian State is a promoter of gambling. And it is not because the State exploits gambling that this makes the game more legitimate or socially beneficial. So, it is strange to see the state apparatus repressing the game of chance when it itself receives values ​​by exploiting this activity. With the classic entry, the Brazilian State says, “do as I say, but not as I do”.

2) Legal games: fixed odds sports betting

With the spread of online gambling, more and more companies in the sector invest massively in improvements and advertising. There are several players in the market, with well-known brands, which usually occupy advertising spaces on soccer fields and in the media in general, sponsoring events, among others.

With the enactment of Law nº 13.756/18, although it was still not a total or broad opening to the legalization of non-state gambling, one can imagine coexistence with a certain regulation of sports betting in Brazil. This law provided for a possible means of betting the so-called fixed odds. Pursuant to Article 29 of the aforementioned Law, the “lottery” modality has been created, in the form of an exclusive public service of the Union, called fixed-quota bets, whose commercial exploitation will take place throughout the national territory. In practical terms, “fixed odds” means that the bettor knows how much he will receive if he is right, and the prize is already pre-defined by the betting company, which calculates the probability of a result happening.

The perspective with Law nº 13.756/18 is that bookmakers could establish themselves in Brazil as well, generating foreign exchange for the nation. But Law nº 13.756/18 determines that such suppliers do not have physical points of sale in the country, and that they can only operate through websites hosted on domains not registered in Brazil.

These bets on sports games, online, with fixed odds, then have an attribute of legality in Brazil, as long as they do not have headquarters here. To give you an idea, gambling revenue in the United States exceeded R$ 315 billion in 2022, according to a report by the AGA (American Gaming Association), the American association of gaming companies. Logically, who doesn’t want a slice of this big pie?

3) The gaming provider state

Article 6 of the Constitution provides that social rights are “education, health, food, work, housing, transportation, leisure, security, social security, protection of maternity and childhood, assistance to helpless”. It is clear that the act of betting brings with it a moment of disconnection from daily problems, which can be seen as a leisure activity, but this would not be the nature of leisure contemplated by the aforementioned device. The same, in this case, is aimed at cultural activities, places to practice sports, squares, etc. Gambling, on the other hand, requires the subject to pay directly for each action he performs, that is, access is neither universal nor free, and as a rule, generates economic losses.

On the other hand, in order to achieve the common good, there is nothing to prevent the State from seeking sources of funds acting as a private agent. Therefore, keeping an eye on what the market has generated through sports betting companies at fixed odds, the interest of municipal and state managers in accessing a slice of earnings generated by the betting activity has grown.

In Porto Alegre, for example, on August 17, 2022, the municipal mayor sanctioned the bill authorizing the city hall to create the public lottery service, giving rise to Law No. Porto Alegre Lottery (Lopa)”. The purpose of the service, in this case, is to generate revenue to qualify and reduce the costs of the public transport system. After the sanction, a decree was issued on January 18, 2023, and a public notice is awaited to define the private partner that will operate the service.

The movement of City Halls and State Executives has been encouraged in view of the result of the judgment of the ADPFs (Claim of Non-compliance with Fundamental Precepts — nº 492 and 493, judged in 2020, the Federal Supreme Court understood that the competence to legislate on lotteries is exclusive to the Union, but that the material competence, to institute lotteries, is a case of concurrent competence with states and municipalities. We can also note that the fact that the Union operates with lottery services does not make it more legitimate than being provided by any other federal entity .

The Union’s resistance to accepting this state of affairs has nothing to do with the welfare of the population, but rather a clear interest in market dominance, which it does not intend to share with private individuals or other state entities. This is a scenario of almost eighty years with continuous restrictions or difficulties, if we consider the prohibition of casinos in Brazil as a historical landmark.

The Union, in this case, defended its “lottery absolutism” with support in Decree-Law nº 204/1967, which, according to Minister Gilmar Mendes, “created a veritable normative island”, generating a fictitious Union monopoly, which is not housed by the 1988 Constitution.

The list of municipalities and states that are starting to implement the legal and material means to create their lottery outlets is long, and there is no turning back, at least for the time being. Rio Grande do Sul, for example, already had a state lottery, whose operation ended in 2004, because it was loss-making, even operating for 150 years. On October 26, 2021, the acting governor of Rio Grande do Sul edited a decree creating a management council to resurrect the Lottery of the State of Rio Grande do Sul, stimulated by the result coming from the STF.

Evidently, state and municipal lotteries will end up fighting for space with federal lotteries and permitted betting systems. It is a competitive market environment, where no partner intends to help the other, with investments in advertising, sales, etc. being essential, like any other commercial activity.

The question that is asked is: municipalities and states become providers of lottery services? At the federal level, there is no doubt that Caixa Econômica attracts the incidence of the CDC to itself, as it is the federal representative in this sense, and not exactly the Union.

We have no doubt that the bettor is considered a consumer, and his status as such is quite consistent with the typicality of article 2, caput of the CDC: “Consumer is every natural or legal person who acquires or uses a product or service as a final recipient”. The same is purchasing and paying for a random result service. Service, in this case, is inherent to leisure. It is not an investment with a guaranteed return. Incidentally, the positive result is something rare or remote to occur in lottery games. And as a consumer, vulnerability is your main characteristic, as pointed out in article 4, item I of the Brazilian consumer law.

Collection of service defects, article 20 of the CDC, fits all those who participated in the consumption relationship, in the supply chain, with greater or lesser intensity, as suppliers, guaranteeing their solidarity in the face of the damage caused to the consumer. And article 14, caput, presents the same perspective with regard to service defects.

Now, if the consumer, in a tangle of possibilities, ranging from illegal gambling to state gambling, opts for the municipal or state lottery, he does not lose this legal status of vulnerable, and he must be guaranteed the same prerogatives that he would have contracted with private company. The game and bet is a contract, and as such, it is destined to fulfill a social function. On the one hand, it provides fun and leisure, and on the other hand, it guarantees profit to the organized business activity that provides it. With a lot of luck, and not bad luck, who knows, the consumer may even get rich, although this result cannot be guaranteed, but if it is, the supplier will be obliged to deliver what he promised (article 30 of the CDC).

When describing who can be treated as a supplier, article 3 of the CDC highlights, among others, the public legal entity, as long as it develops production, assembly, creation, construction, transformation, import, export, distribution or commercialization of products or services provision. As Cláudio Bonatto and Valério Dal Pai Moraes point out, the modern State has assumed several functions, not only in the social area, but also in the economic sphere, even carrying out certain naturally entrepreneurial activities at the level of competition with other professionals, suppliers of products and services ( see, for example, the case of state-owned banks, such as Caixa, Banco do Brasil, etc.), starting, in these cases, to seek profit as a result of commercial activity. In this regard, when the State, or rather the companies in which it participates, becomes subject to the rules of the CDC.

In the CDC, there are direct references to public services, such as the following provisions: 3rd, caput, 4th, item VII, 6th, item X, article 22, caput, among others.

Something that remains very clear is that gambling is not an essential service that citizens need to access a dignified life. On the other hand, as a moment of leisure, it can provide moments of joy, as well as strong disappointment, if the intention is to get rich at the expense of gambling. This prerogative ends up being absorbed by those who promote the game, and not by those who consume it.

Possibly, municipalities and states seek private partners with better management conditions for the commercial activity of selling games and betting. But its presence in this non-essential service environment, generating an expectation of more intense control, is an attraction that must be honored. And since the CDC is the best platform for protecting the rights of gamers-consumers, we can safely say that the State providing games, directly or indirectly, has bought its ticket to the world of Consumer Protection Law.

The theme is recent, and it is expected that it will serve to strengthen the level of consumer protection, and not the opposite. In this sense, we congratulate the legislator of Porto Alegre, who, when creating the permissive norm, pointed out the necessary observation of the rules that make up the CDC. May it serve as an example to others.