The backdrop to the dispute is the dizzying growth of this billion-dollar market, which will be taxed from this year onwards, generating revenue for federal and state tax authorities. It is, therefore, a sector of interest to governors, involved in a new debt restructuring, and also to the Union, which is trying to get closer to the goal of zero deficit in public accounts.
In this context, the clash between Finance and Loterj concerns the scope of state lotteries - made possible recently by the Supreme Federal Court (STF) decision in 2020 that broke the Union's monopoly. In a formal notification sent last month, the economic team requested that the Rio de Janeiro state agency amend the accreditation tender for ‘bets’ (as the operating companies are called in Brazil).
The requirement is that the principle of territoriality be respected, meaning that the operation should be restricted to bettors located within the state - as stipulated by the law passed by Congress at the end of last year. For this to happen, platforms would need to use geolocation services, which process real-time information.
However, Loterj rebuts the Treasury's arguments. The agency argues that the same law preserved the terms of state concessions - this for those carried out before the issuance of the Provisional Measure (PM) that established the guidelines for the activity nationwide. The government's MP was published in July 2023, while the Rio lottery bid dates back to April of the same year.
"Loterj, before the issuance of any federal law to the contrary, allowed virtual betting operations to take place throughout the internet environment, not disregarding the applicable federal legislation at the time or the decisions of the STF," says the letter sent to the economic team.
"On the contrary, it sought to adapt to the contemporary reality of commerce and service provision, ensuring that, even in a virtual environment, operations are carried out under the aegis of Rio de Janeiro state legislation," the text continues.
Loterj vs. Union
At the time of the bid, the conditions offered by Loterj were much more favorable to companies than those later established by the federal government. The state charges, for example, R$ 5 million (US$ 1m) for the concession, compared to the R$ 30 million (US$ 6m) demanded by the Union; and taxes 5% of the GGR (gross gaming revenue), compared to the 12% practiced by the government.
Thus, if state lotteries are not restricted to their respective territories, the federal units will inevitably compete with the Union and also with each other. This competitive environment is viewed favorably by Loterj but with concern by the economic team. The fear is that this may hamper the regulation of bets nationwide as well as the potential revenue for the federal government from this market.
Rio's Lottery currently has four accredited betting houses, including PixBet, the master sponsor of Flamengo. And another five are in the accreditation process - still a modest number for a market that needs scale to achieve significant revenue.
Within Loterj, the assessment is that Finance should hurry with the regulations that will establish a framework to the sector, thus combating illegal gambling instead of wasting time fighting with the State led by Claudio Castro (PL).
"We note that, so far, there is no concrete action by the Ministry of Finance aimed at effectively combating the proliferation of illegal gambling in the country. We emphasize, therefore, the need for a more strategic and coordinated action, in partnership with other regulatory and public safety agencies, to address this challenge," says the letter signed by Loterj President Hazenclever Lopes Cançado.
Four months after the law was sanctioned by President Luiz Inácio Lula da Silva, only one ordinance has been issued by the ministry. Sources familiar with the matter told Estadão that part of the texts will require approval from the Ministry of Sports, which, unlike the Treasury, does not have a dedicated technical team for the subject, and this would be one of the reasons for the delay.
Centrão's interest
It is not today that the Sports Ministry - led by former congressman André Fufuca, close to the Speaker of the House, Arthur Lira (PP-AL) - and Finance have been in dispute over the operation of sports betting in the country.
In January, Centrão's interest in this market and the disputes surrounding regulation led to the resignation at the request of José Francisco Manssur. The then special advisor to the Finance Minister, Fernando Haddad, was in charge of the entire process of formalization and taxation of sports betting in the country and was the natural choice to assume the newly created Secretariat of Prizes and Bets - which, since then, has been without the appointment of a holder.
Estadão learned that the secretariat is working to release, soon, a regulatory agenda, which will include eleven more ordinances. The goal is to publish them still in the first semester.
Asked about Loterj's response and the possibility of the issue going to court, the Finance Ministry stated that the administrative procedure against the Rio de Janeiro autarchy, initiated with the March notification, was already a "precondition for judicialization". This is in case the letter is not complied with - which was confirmed this Friday.
AGU follows the case
Interlocutors familiar with the matter affirm that the Attorney General's Office (AGU) is following the case and will assess the possibility of taking the issue directly to the STF, in the proceedings that decided on the possibility of states exploring lotteries in 2020. Because it involves federative issues, the government's understanding is that the Supreme Court does indeed have jurisdiction over the matter.
Currently, Loterj is already responding to a popular action pending in the Rio de Janeiro court precisely due to the issue of territoriality. Last month, the process gained reinforcement from the State Lottery of Paraná, Lottopar, which joined as a party to the action. In Lottopar's assessment, the Rio de Janeiro autarchy created, through a "mere bid, a legal fiction of territoriality."
"No one doubts the possibility of the States, including Rio de Janeiro, exploiting lotteries. They have the possibility and the right to exploit this market through their own regulations. However, without a doubt, the state governments must respect federal legislation; this is what was decided by the Supreme Court (in the cases judged in 2020)," evaluates Fernanda Meirelles, partner in the technology, media, and telecommunications area of FAS Advogados.
At that time, the STF broke the Union's monopoly on lottery operations but determined that governors would need to follow federal legislation. She believes that Rio de Janeiro is unlikely to emerge victorious in this dispute but points out that there are other issues that may be litigated by the States, with a greater chance of acceptance by the courts.
Among them is the fact that the law passed in Congress limits companies to a single state license. That is, a betting house that operates in the Brazilian market can only operate nationwide and in a single state in the country. "The exploration (by the States) must be guaranteed reasonably," the lawyer ponders.
Market assessment is that state concessions will play a significant role for medium-sized companies, which do not have R$ 30 million to invest in a national license or have a more regionalized operation. That is, a way not to restrict the segment only to large platforms.
Source: Estadão
