The Federal Supreme Court finally pacified the exploitation of lotteries by the states in Brazil, understanding this type of operation as legitimate and not exclusive to the federal government. Thus, the Union's monopoly on the exploitation of lottery activities, established by decree of 1967, fell to the ground.
According to the STF, the exploitation of lotteries characterizes a public service guaranteed by the Federal Constitution of 1988, and Decree-Law no. 204/67 violated this prerogative by restricting this competence solely to the Union and, consequently, prohibiting the regulation of lottery services and their operation by the member states of the federation. Therefore, at least in this part the Decree-Law was not accepted by the Federal Constitution.
Faced with this new scenario, which corrects a historical distortion, some state public administrations are already moving and preparing to launch their own lotteries. Other governments that ran the risk of having to close their lottery services, such as Rio de Janeiro, Minas Gerais, Paraíba and Ceará, will now be able to maintain them and even expand them after the decision of the Supreme Court.
Even states that previously did not show interest in the exploration of lottery activities - the case of São Paulo and the Federal District, for example - have decided to join the game and are looking for the most appropriate ways to build their lotteries, through partnerships with the private sector, in order to increase its budget collections and thus offer better services to its population in social areas.
The lottery market is highly attractive. In 2020 alone, Caixa Econômica Federal (CEF) raised more than R$ 17 billion in bets – 40% of which with the Mega-Sena -, a historic record, which could be expanded with the feasibility of state lottery games.
However, caution, transparency and a lot of responsibility are needed in the development of a sustainable model of lotteries within the state governments, by choosing reputable partners and proven expertise in the implementation and exploitation of lottery services, which are guided by the premise of responsible game that already guide the products currently offered by CEF.
In addition, one cannot lose sight of the social character, provided for in the legislation, of lotteries. In other words, the net income obtained from the creation of new lottery products and their operationalization should be allocated to social and medical assistance programs.
For the construction of a viable lottery format in the states, it is imperative that mistakes are not repeated, as happened during the implementation of bingos in the early 2000s, when the accreditation model of interested institutions for a fixed period - theoretically cheaper and fast – but without the guarantees and ties needed to consolidate this segment. Precariousness and lesser regulation, in addition to weak state control, cannot be repeated.
In this sense, public competition for the exclusive concession of the exploitation of lottery services seems to be the most appropriate way, as it allows the exploration of the modalities of lottery products by the winning institution of the bidding process for a longer period - 10 to 20 years - but with the partner's obligation to implement the necessary market and technological innovations throughout this period, under continuous inspection of services by the government and the necessary accountability to the control bodies.
The structuring of the public bidding procedure is complex and challenging, especially for states that do not yet have experience in the operation of lottery services. In order to make their own games viable, some state administrations are adopting a model of expression of interest, through which companies and consortia from the private sector present studies related to the lottery market, evaluating its legal-regulatory and economic-financial feasibility, among others topics.
Based on the studies presented, the public bidding processes for the implementation of new lotteries will be modeled. Following this path, it will be possible for state managers to establish a safe and sustainable format for delegating the exploitation of lottery services for the benefit of society as a whole.
Bruno Nagli
Lawyer and former Executive Secretary for Economic Development of the State of São Paulo.
