At the beginning of this month, Supreme Federal Court (STF) Minister André Mendonça passed a preliminary decision prohibiting Loterj license holders from operating within Brazil, while requiring the use of geographic location tracking to ensure they can only accept bets within the state of Rio de Janeiro.
Loterj's appeal against this decision was rejected, with Mendonça claiming that the national regulatory body's rebuttal was merely because they "disagree with the appeal decision".
Cansado believes that the STF's actions endanger the stability of Brazil's legal gambling market, which officially started on January 1.
In an article in "Migalhas", Cansado wrote: "The legal uncertainty in the Brazilian gambling industry exposes legal weaknesses, unfair competition, and bureaucracy, which hinders the market and damages the economy."
"The unfair competition in the Brazilian gambling market hinders entrepreneurship, weakens the national economy, and is not only supported by informal (illegal) operators but also by the public administration itself, systematically fostering legal uncertainty and thus encouraging secretive actions."
What is Loterj's argument?
Loterj's reason for appeal is that they believe Mendonça's ruling has "defects, omissions, ambiguities, and significant errors". The company believes that this ruling could lead to a decrease in national tax revenue and disrupt Brazil's licensed gambling industry.
Loterj also complained that mandatory geographic location tracking was created by Law No. 14,790 of December 2023, about six months after Loterj's certification notice 01/2023 was issued.
Loterj's certification notice stipulates that bets are considered to be placed within the state of Rio de Janeiro as long as there is "explicit declaration and consent of the bettor".
The national regulatory body claims that Mendonça "was misled by the union" and did not previously require Loterj licensees to use geographic location technology.
"In other words, based on obvious logic and systemic symmetry, Loterj's past actions should be protected, as they are bound by its 01/2023 certification notice, since they precede the actions of the administrative department, which did not foresee any territorial restrictions, right?" Cansado said.
"Well, the Brazilian government doesn't think so, which again contradicts the social values of free enterprise that Brazilian gambling legalization is based on."
The threat of overregulation in Brazil
Operators authorized by Loterj have paid over 100 million Brazilian Reais (£13.3 million/€15.8 million/$16.1 million) in taxes to the federal government.
Loterj believes that these national contributions are threatened by the STF ruling, as well as the presence of companies located in tax havens and operating in the Brazilian gambling market.
Currently, Brazil has 14 companies with full operating licenses and another 54 companies with temporary authorization. These operators have 30 days to ensure that the gambling systems are fully certified and other aspects of their operations are smoothly completed.
"The alliance itself, using creationism and its own evil, with the support of the judicial department, has provided a truly hostile environment for legal betting, especially since it has imposed stricter rules on domestic betting, while countless participants located in tax havens and China, not subject to Brazilian law, continue to operate in the country freely, without paying federal, state, and municipal taxes, even representing tax evasion," Cansado added.
In Loterj's view, this "distrust and insecurity of inequality" is most disadvantageous for Brazilian gamblers. If overregulation continues, it may push gamblers and operators towards the black market.
