In recent weeks, the main sponsorship deal between Corinthians and Esportes da Sorte, one of the most valuable commercial partnerships in Brazilian football, has found itself at the center of an intense regulatory dispute. With the regulation of the sector under Law 14,790 of 2023, the SPA (Secretariat of Prizes and Bets under the Ministry of Finance) has begun restricting the advertising of state-authorized betting operators solely to the audience within the State where the operator holds its authorization.
This issue has longstanding roots and relates to significant rulings by the STF (Supreme Federal Court). On numerous occasions, the STF has been called upon to assess the constitutionality of state laws related to public lottery services. A consensus has emerged that, although the Union holds exclusive authority to legislate on consortium systems and draws, including fixed-odds lottery betting, this prerogative does not exclude States and the Federal District from the right to operate and regulate such activities.
In ruling on joint actions (ADPF 492 and 493 and ADI 4986), the STF determined that the provisions in Decree-Law 204 of 1967, which grant exclusivity to the Union over lottery services, were not upheld by the 1988 Constitution. This ruling paved the way for States to assume an active role in the betting market, challenging the Union's exclusive model.
Following this decision, Rio de Janeiro took the lead with Decree 48,806 of 2023, establishing rules for the operation of fixed-odds betting within the State and launching a licensing process that allows private agents to enter the market by paying a concession fee of R$5 million (US$ 870,000) and a monthly contribution of 5% on GGR (Gross Gaming Revenue).
The licensing process initially required geoblocking mechanisms to restrict betting access solely to users located within 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 terms stating that “the completion of online bets will always be considered to have taken place within the territory of the State of Rio de Janeiro, for all purposes and objectives, including tax and legal matters, regardless of geolocation.” This triggered a fierce dispute with the Secretariat of Prizes and Bets.
Loterj's interpretation, which allows betting outside of Rio de Janeiro’s territory, has been viewed by the Union as defying the STF's ruling and violating the Fixed-Odds Betting Law. This practice weakens the competitiveness of federal authorization, whose main advantage is the ability to operate and advertise nationally but at a much higher cost.
While the federal concession fee is R$30 million (US$ 5.2m), Rio de Janeiro’s model is more attractive, with a reduced concession fee and substantially lower taxation on GGR. The possibility that other states might follow Rio's example concerns the SPA, which sees this move as a threat to centralized regulation and Union revenue.
In response to this controversy, in March 2024, the SPA required Loterj to cease accepting bets from outside the State, invoking the principle of territoriality in lottery operations, which aims to restrict state activity within their own geographic limits. Conversely, Loterj argued that its regulation respects federal law, as virtual operations consider the location of the service provider, in line with Complementary Law 116 of 2003.
To strengthen its stance, Loterj also relies on §8 of Art. 35-A of the Fixed-Odds Betting Law, which preserves state authorizations initiated before MP 1,182 of 2023. Since its licensing process predates this MP, Loterj contends that the legal act must be respected, while the Finance Secretariat argues that, as a public service, fixed-odds betting must adhere to territorial limits.
The dispute has now reached the courts: through ordinances SPA/MF No. 1,225, 1,231, and 1,475 of 2024, the SPA reaffirmed the restriction of advertising and sales of state lottery services to the local territory. In response, Loterj filed a writ of mandamus and obtained an injunction suspending these provisions in the State.
The AGU (Office of the Attorney General) subsequently filed an original civil action with the STF, seeking to end out-of-state betting by Loterj operators and enforce geoblocking.
Last week, the STF reignited the regulatory debate by siding with Loterj’s interpretation in ADI 7640, provisionally suspending provisions of the Fixed-Odds Betting Law that restricted state operators’ advertising to the local audience. This decision paves the way for state lotteries, which would otherwise be limited to a regional audience, to promote their activities nationally with legal backing, reinforcing state autonomy.
Although a final ruling has yet to be issued, tensions are high. The current legal uncertainty puts betting operators in a precarious situation, casting doubt on the viability of their operations. Without swift resolution, regulatory uncertainty may deter new investments and hinder the sector's growth.
With the STF in the spotlight, the betting market awaits decisions that will define clear boundaries for each regulator’s authority, creating a more secure and predictable environment and paving the way for a harmonized regulatory framework among the federative entities.
Udo Seckelmann
Lawyer and head of the Betting and Crypto department at Bichara e Motta Advogados, professor at the CBF Academy, and holder of a master's in international sports law from the Instituto Superior de Derecho y Economía in Madrid (Spain). Writes for Poder360 monthly.
Pedro Heitor de Araújo
Law student at PUC-RJ, specializing in crypto & gambling at Bichara e Motta Advogados since 2022. As an analyst, researcher, and enthusiast, he focuses on legal dynamics related to crypto asset regulation, DeFi (decentralized finance), betting, and gaming. He has completed courses in DeFi and NFTs at the University of Nicosia (Cyprus). Additionally, he founded the legal community "pedroheitor.eth," fostering discussions and sharing information on Cryptolaw and Gambling Law.
Source: Poder360
