The experts from Bichara e Motta Advogados law firm, Udo Seckelmann and Pedro Heitor de Araújo, analyze the legal dispute between Loterj and the Brazilian government. The current legal uncertainty places companies in a murky scenario that questions the viability of their operations. "If this dispute is not resolved quickly, regulatory insecurity could discourage new investments and curb the sector's growth," they warn.
In recent weeks, Corinthians' master sponsorship with Esportes da Sorte, one of the most valuable commercial partnerships in Brazilian football, found itself at the epicenter of an intense regulatory dispute. With the sector's regulation by law 14.790 of 2023, the SPA (Secretariat of Prizes and Bets of the Ministry of Finance) began to restrict the advertising of betting operators authorized at the state level to the public of the State where the operator is authorized.
The impasse has been long-standing and refers to important decisions of the STF (Supreme Federal Court). On several occasions, the STF was called upon to examine the constitutionality of state legislations related to the public lottery service.
It was established that, although the Union holds exclusive competence to legislate on consortium and lottery systems, including fixed-quota betting modalities, this prerogative does not exclude the competence of the States and the Federal District to explore and regulate such activities.
When jointly judging the actions (ADPF 492 and 493 and ADI 4986), the STF determined that the provisions of Decree-Law 204 of 1967, which confer exclusivity to the Union over the provision of lottery services, were not received by the Constitution of 1988, paving the way for States to take an active role in the exploration of bets, confronting the Union's exclusivity model.
Following this decision, Rio de Janeiro took the lead with decree 48.806 of 2023, outlining rules for the exploration of fixed-quota bets at the state level and launching the accreditation notice, which allows private agents to enter the market by paying a grant of R$ 5 million and a monthly contribution of 5% on the GGR (Gross Gaming Revenue).
The notice also initially required geoblocking mechanisms to restrict access to bets to users located in the State.
However, in July 2023, Loterj relaxed this restriction, allowing operators to accept bets from users located outside the State, provided they agreed to the terms that the "effectuation of online bets will always be considered carried out in the territory of the State of Rio de Janeiro, for all purposes and purposes, including fiscal and legal, regardless of geolocation", triggering a fierce dispute with the Secretariat of Prizes and Bets.
Such interpretation by Loterj, allowing bets outside the Fluminense territory, was seen by the Union as an affront to what was decided by the STF and as a breach of the Fixed Quota Betting Law. The reality is that this practice weakens the competitiveness of the federal authorization, whose central advantage is the permission to operate and advertise nationally, but at a much higher cost.
While the federal grant is R$ 30 million, the model of Rio de Janeiro proves more attractive, with a reduced grant fee and substantially lower taxation on the GGR. The possibility that other States might follow Rio's example concerns the SPA, which sees in the movement a threat to centralized regulation and to the Union's revenue collection.
Faced with this imbroglio, in March 2024, the SPA demanded that Loterj cease the permission to accept bets from outside the State, invoking the principle of territoriality of lottery exploration, which aims to limit the actions of the States to their own geographical boundaries.
In response, Loterj argued that its regulation respects federal legislation, since operations in a virtual environment consider the location of the service provider, as determined in Complementary Law 116 of 2003.
To reinforce its position, Loterj also relies on §8 of art. 35-A of the Fixed Quota Betting Law, which preserves state authorizations initiated before MP 1.182 of 2023. As the notice predates this MP, Loterj argues that the perfect legal act must be respected, while the Finance Secretariat understands that, as it is a public service, fixed quota bets must respect the territorial delimitation.
The dispute reached the courts: the SPA, through the SPA/MF ordinances no. 1.225, 1.231, and 1.475 of 2024, reiterated the restriction of advertising and commercialization of state lottery services to the local territory, while Loterj filed a writ of mandamus and obtained an injunction to suspend the effects of these provisions of the ordinances in the State.
In response, the AGU (Attorney General of the Union) filed an original civil action in the STF requesting the interruption of bets outside the State for Loterj operators, in addition to the mandatory geoblocking.
Last week, the STF gave new momentum to the regulatory dispute by aligning with Loterj's interpretation in ADI 7640, temporarily suspending provisions of the Fixed Quota Betting Law that restricted the advertising of state operators to the local audience.
This decision opens the way for state lotteries, which would be limited to a regional audience, to promote their activities nationally with legal support, reinforcing state autonomy.
Although the final decision has not yet been issued, the tension is high: the current legal uncertainty places betting operators in a murky scenario that questions the viability of their operations. If this dispute is not resolved quickly, regulatory insecurity could discourage new investments and curb the sector's growth.
With eyes on the STF, the betting market awaits definitions that set clear boundaries between the duties of each regulator, creating a safer and more predictable environment and paving the way for a harmonious regulatory framework among the federative entities.
Udo Seckelmann
Lawyer and head of the Betting and Crypto department at Bichara e Motta Advogados, professor at CBF Academy and master in international sports law by the Instituto Superior de Derecho y Economía, in Madrid (Spain). He writes for Poder360 monthly on Wednesdays.
Pedro Heitor de Araújo
Law student at PUC-RJ and has been working in the areas of crypto & gambling at Bichara e Motta Advogados since 2022. As an analyst, researcher, and enthusiast, he is dedicated to the legal dynamics related to the regulation of crypto assets, DeFi (decentralized finance), betting, and gaming. He founded the legal community "pedroheitor.eth", promoting debates and disseminating information about Cryptolaw and Gambling Law.
Source: Poder360
