The year 2021 brings hope for new recipes for the battered state coffers, in the midst of the serious and lasting pandemic of the COVID-19. On February 3, the decision of the Supreme Federal Court (STF) became final, which enabled the exploitation of the public service of state lotteries, either directly by local governments, or by private companies through bidding.
In view of this opening, several States have already started to structure their lotteries or to expand them, in the case of a few that have kept them in operation since the restrictive Decree-Law No. 204, of 1976.
At the end of 2020, the Supreme Court upheld the non-compliance with fundamental precepts (ADPFs) nº 492 and nº 493, which questioned the wide operation of state lotteries, and dismissed the direct action of unconstitutionality (ADI) nº 4,986, which discussed if the rules of the State of Mato Grosso that regulate the exploitation of lottery modalities invaded the Union's private competence to legislate on consortium systems and sweepstakes.
The STF understood that, although the legislative competence over lotteries is exclusive to the Union, the States have administrative competence to operate lotteries, provided that in compliance with federal legislation, as the Federal Constitution does not provide for any monopoly of the Union in this segment.
As the legislative competence of the matter remains with the Union, States will only be able to operate the lottery modalities provided for in federal legislation, especially in Law No. 13,756, of 2018. In addition, it is up to the Ministry of Economy, through the Secretariat for Evaluation, Planning, Energy and Lottery (Secap), to monitor the compliance with federal legislation by States.
Since the end of 2020, several States have been moving towards the creation of their own lotteries, and those already operational will be able to explore the new modalities created by federal law, generating new opportunities for acting in the market.
Among the expectations of the sector, we highlight the regulation of sports betting (fixed-odds betting), scheduled for the first half of 2021. This modality represents between 30% and 40% of the entire world gaming market. The possibility of exploiting sports betting was approved by Law No. 13,756, of 2018 and, after its regulation, it should be explored in a competitive environment through authorization or concession, and its revenue may vary between R$ 4 billion and R$ 10 billion (US$ 700m to US$ 1.75b) at the federal level, according to government projection.
In view of the release of state lotteries, it will be necessary to understand how the Union and the States will act in harmony. The Federal Government should standardize federal rules for placing bets and operating state lotteries. Secap has already shown concern with maintaining fair competition between the Union and the States, especially regarding virtual betting.
As of January 22, the State of Rio de Janeiro held a public consultation to discuss the contracting of a service provider responsible for exploring the lottery modalities of numerical predictions and instant lottery, for a short period of five years, without public concession, which should drive away traditional operators.
In the bidding process intended by Loterj (rio de Janeiro’s lottery), the operator will be responsible for assembling the entire ticket distribution network and developing the technological platform, which is an effective and cost-effective alternative. However, one must think about the operating limits of each state operator and what mechanisms and criteria can be adopted to avoid gamblers from other states.
In this sense, the lotteries of the US states of Michigan and Pennsylvania, which are seen as a reference in online betting, adopt different rules for limiting bets: while the Michigan lottery requires that all gamblers be residents of the state, that of Pennsylvania allows bettors from all over the country to place bets, as long as they are physically in the state, which is verified through geolocation.
Geolocation technology uses a combination of methods that not only ensure that customers are within state limits, but also that customers are not using spoofing technology (such as VPNs) to mask their real locations.
At the end of 2020, the State of Maranhão enacted legislation allowing the exploitation of lotteries by Maranhão Parcerias (Mapa), a mixed economy company linked to the State Secretariat of Government. As of January, Mapa launched a public call notice, in the form of the Private Interest Expression Procedure (PMIP), to collect studies and projects for the implementation of the state lottery service.
The same path was followed by the Lottery of the State of Minas Gerais, which launched the LEMG Expression of Interest Procedure No. 01/2021, whose deadline for interested parties to submit the authorization request for the presentation of studies expired on the 9th.
The Legislative Assembly of the State of Sao Paulo, in an attempt to anticipate discussions about the resumption of operations of its state lottery, had approved Bill no. 40/2021, which contained in one of the articles vetoed by the governor a prediction about the allocation of resources from Lotesp.
Other practical issues still require discussion and cooperation between the Union and the States, but advances in the betting and lottery market have been rapid on the part of the States, lacking resources. By recreating state lotteries and regularizing pending matters, it will be possible to demonstrate the legal certainty expected for private players in the sector to make significant investments in the country.
Jun Makuta e Claudio Timm
TozziniFreire Advogados partner
Stefania Gomes Toschi
TozziniFreire Advogados partner
Special for Valor
