In the Original Civil Action, the AGU claims that the accreditation rules for betting houses managed by Loterj do not restrict online betting to the state of Rio de Janeiro alone. It also points out that Loterj has lax rules regarding the prevention of money laundering and financing of terrorist actions.
According to the AGU, Loterj adopts a system in which bettors declare that the bets will be made in the state of Rio de Janeiro. However, there is no geolocation system that guarantees that these bets actually originate from the state. The system also does not block bets from other regions.
According to the terms of the lawsuit, in practice, Loterj accredits companies to operate the service nationwide, which has harmful consequences for the federative pact and free competition. Furthermore, operating nationwide violates the rules of the Ministry of Finance and invades the jurisdiction of the Union by operating lottery services throughout the national territory.
The lawsuit cites, as an example of violation of equality between federative entities and free competition, that the states of Paraná and Maranhão require the use of geolocation mechanisms to operate lottery services.
The lawsuit requests the granting of a preliminary injunction to suspend the provisions of the Loterj accreditation notice that allowed the operation of online betting activities beyond state boundaries. The request also includes the immediate cessation of the operation of the activity by companies accredited by Loterj outside the territorial limits of the State of Rio de Janeiro, including the mandatory use of electronic geolocation mechanisms.
Tax war
A technical note from the Prizes and Betting Department of the Ministry of Finance, attached to the lawsuit, clarifies that the national operation of companies accredited by Loterj acts as a perverse incentive for predatory competition between federated entities, analogous to a tax war scenario.
"Indeed, if this territoriality parameter of Rio de Janeiro were considered valid throughout Brazil, the states would compete to attract fixed-odds betting operators to their jurisdictions and would be induced to weaken their regulatory standards and progressively deteriorate their legal institutions, impacting cybersecurity, responsible gaming, the financial health of operators and the fight against money laundering," says an excerpt from the petition submitted to the STF.
The AGU also claims that the State of Rio de Janeiro and Loterj have not issued regulations provided for in the Money Laundering Law (Law No. 9,613/1998) to regulate compliance with obligations to prevent money laundering and financing of terrorism and proliferation of weapons of mass destruction (PLD/FTP), within the scope of the operation of the online betting service.
A technical note from the Financial Activities Control Council (Coaf) attached to the lawsuit states that the territoriality assessment criterion adopted by Loterj causes severe compromise to the money laundering prevention system.
In the document, Coaf emphasizes that the acceptance of the territoriality assessment criterion provided for in Loterj's authorization notice would have the potential to transform each Brazilian state into a center for capturing bets worldwide, increasing the risks of using the so-called "Bets" as a channel for money laundering and related illicit practices to global levels.
The Attorney General's Office is requesting that the Supreme Federal Court grant a preliminary injunction to suspend the provisions of the Loterj accreditation notice that allowed the online betting activity to be carried out beyond state boundaries, and that Loterj and the State of Rio de Janeiro be required to immediately cease the operation of the activity by companies accredited by Loterj outside the territorial limits of the State of Rio de Janeiro, including the mandatory use of electronic geolocation mechanisms.
Source: GMB
