The São Paulo government is preparing for the auction of the state lottery concession at the São Paulo Stock Exchange (B3), scheduled for September 13. The Federal Supreme Court (STF) re-enters the scene with the filing of a Direct Action of Unconstitutionality by 6 states and the Federal District against the provision of Law 14.790 that prevents the same economic group from obtaining a concession in more than one federal unit. The São Paulo project expects to raise R$ 3.4 billion in 15 years.
The São Paulo government is preparing for the auction of the state lottery concession at the São Paulo Stock Exchange (B3), scheduled for September 13. The exploration of the lottery market, considered lucrative, has been allowed for states and municipalities since 2020, when the Federal Supreme Court (STF) unanimously decided that the Union does not hold a monopoly over the business.
Despite the STF's decision, at the end of 2023 the National Congress approved Law 14.790/2023, which regulates sports betting and online games. It bothered the governments of São Paulo, Minas Gerais, Acre, Paraná, Mato Grosso do Sul, Rio de Janeiro, and the Federal District by preventing the same economic group from obtaining a concession in more than one state to explore lottery services. In practice, this would benefit the Union, as the concession and federal grant payment would allow the company to operate throughout the country.
Behind this discussion is the dispute between the states and the Union both for the billion-dollar revenue from the sale of grants and for the taxation of the sector. The approval of Law 14.790/2023 was a priority for the Minister of Finance, Fernando Haddad, and the Lula government (PT) to increase tax revenue.
Opposed to parts of the legislation, the six states and the DF filed a Direct Action of Unconstitutionality (ADI) with the STF, which has not yet been judged. "We are waiting for the decision very optimistic about what is coming, as the STF has been very balanced in this respect, the decisions have been technical and positive", says to Gazeta do Povo Edgard Bezonatti Neto, CEO of Companhia Paulista de Parcerias.
Regarding taxation, the São Paulo project was made based on the STF's 2020 decision and determines that the incidence of the betting operation tax will occur according to the location where the user will make the purchase act. "The interpretation that the state of São Paulo is making of this, which is reasonably settled, is that the bettor needs to be in São Paulo to be able to bet on our lottery", he says.
For this, the lottery site is required to identify the user's geolocation through the IP or mobile device services. If the player is outside the state of São Paulo, they will not be able to make bets.
The director believes that the ADI, which is in the hands of Minister Luiz Fux, will be judged before the auction and that there are few chances of the decision being more favorable to Caixa Econômica Federal and contrary to a more free competition environment among the states. Still, he states that the São Paulo lottery concession project is prepared for "unpleasant surprises".
"We have very positive prospects, regardless of the ADI decision, because we have put some mechanisms within the contract that would accommodate a later decision. But we hope that the decision comes before, there is still a reasonable time until the auction", he believes.
The expanding betting market arouses the interest of investors and states
A report published by XP Investimentos in January this year, based on estimates from the betting platform BNL Data, shows that companies in the sector would earn R$ 13 billion in Brazil in 2023, an increase of 71% compared to 2020. The estimate of the total value of bets last year would be between R$ 100 billion and R$ 120 billion, which represents approximately 1% of the Brazilian GDP.
Ricardo Bianco Rosada, partner at brmkt.co, a strategic and marketing consultancy with experience in the betting market, states that in 2024 the market numbers will grow. "This year we think that all the bets that exist in Brazil will move R$ 250 billion, with 37% of that value coming from the state of São Paulo", he says.
To compete with federal licenses, which allow brands to operate with consumers from all over Brazil, Rosada states that state management must offer a very good product and with a favorable condition for the company to agree to operate only in the state and with exclusivity for local players. "If the grant and taxation are too high, it is not attractive for companies", he adds.
According to the CEO of Companhia Paulista de Parcerias, the São Paulo lottery attracts a lot of interest from investors due to the size and income concentration in the state of São Paulo. "It is a market that, in terms of transaction volume and revenue values, has an equivalence close to the market in England or France, so it is a very attractive asset for the sector", he says.
Edson Lenzi, executive director of PayBrokers, a financial institution specialized in iGaming and lotteries in the national market, states that the fact that the state is the richest in the country "is reflected in the bets, with 30% of the total transactions of the sector coming from São Paulo".
The São Paulo lottery project expects to raise R$ 3.4 billion in 15 years
The concession project of the Tarcísio government estimates an initial fixed grant, i.e., the minimum amount paid to the State for the right to explore the contract for 15 years, at R$ 260 million. The variable grant, 35% of the gross operational revenue of the concessionaire, is estimated, in a conservative projection, at R$ 3.4 billion, an amount that will be allocated for investments in the health area.
The details of the São Paulo lottery concession notice:
Five types of service may be explored, in physical locations or online.
Lottery of specific prognosis (predictions of various games, such as football and winners or eliminated in reality show)
Sports prognosis lottery (attempts to predict the number of goals scored in matches, such as Lotogol, Loteca)
Numeric prognosis lottery (players choose numbers and win if they match a number of drawn numbers. Example: Mega-Sena, Quina)
Instant lottery (cards that are scratched to find out if they won a prize, like Scratchcard and Lotex)
Passive lottery (pre-printed tickets with specific numbers, like Federal Lottery and Christmas Lottery)
At least 31 exclusive "concept store" sales points must be installed, mandatorily, in all regions of the state of São Paulo.
The locations must be in busy points, but at least 300 meters away from nurseries or educational units.
Implementation of 11,000 non-exclusive sales points is not mandatory.
Among the obligations of the concessionaire, is to present a plan to prevent money laundering, in addition to a responsible gaming plan with blocks to minors.
Companies must have certifications such as WLA, which aims at the quality of the operation with regard to information security and commitment to responsible gaming; GLI, which consolidates a shielded system regarding money laundering and manipulation of games; ISO certification, to ensure compliance with the best market parameters.
The Public Services Regulatory Agency of the State of São Paulo (Arsesp) will be responsible for supervising the contract, while an independent verifier will provide support in the supervision.
According to information from Gazeta do Povo along with market sources, the São Paulo concession is attracting major international players who already have operations in Brazil, such as IGT and Scientific Games, which operate the lottery in the state of Minas Gerais. In addition to them, the process arouses the interest of companies like Intralot, Hebara - which has already operated the lottery in Rio de Janeiro - Jogos da Sorte, Lottoland, and Idea Maker.
Source: Gazeta do Povo
