The exploitation of lottery services has garnered favor among various federative entities following the Supreme Federal Court's ruling on Claims of Non-Compliance with Fundamental Precepts 492 and 493, alongside Direct Action of Unconstitutionality 4.986, during a Plenary session on 09/30/2020.
The ruling resulted in the unanimous recognition of the states' and the Federal District's material competence to exploit and regulate such a public service, while preserving the Union's exclusive legislative competence to define the lottery modalities eligible for exploitation (art. 22, XX of the Federal Constitution), now established in Law 13.756/2018.
It is true that the subject of the actions that led to this landmark decision solely encompassed the competence of states and the Federal District to exploit the services. However, the votes cast by Justices Gilmar Mendes (1) and Alexandre de Morais (2) raised a new hypothesis, albeit in brief mentions, namely whether municipalities could implement and exploit their own lottery service in exercising their local interest responsibilities.
Following this ruling, not only did states and the Federal District begin enacting laws and developing feasibility studies for the delegation of these services, but a similar movement started among some municipalities (3), assuming that the ruling favors them. There are numerous examples, albeit at different stages of maturity.
Capitals like Porto Alegre and São Paulo have initiated the Procedure for Expression of Interest to develop feasibility studies related to the implementation and operation of their own lotteries. Cuiabá and São Vicente, on the other hand, have already delegated the activity to private partners through concessions, with the latter having already started selling lottery products to the public.
However, uncertainty persists regarding municipal competence on the grounds of being a local interest service (art. 30, V of the Federal Constitution), especially given the dynamics and negative externalities arising from lotteries, which require full integration and scale to justify from a technical and economic-financial feasibility standpoint. This scenario appears to echo the protracted discussion faced by states from the promulgation of Decree-Law 204/1967 until the Supreme Court's landmark ruling in 2020.
It is certain that exploitation by municipalities is met with resistance, as market competition will affect the volume of bets from states and the Union itself, making it easy to foresee continued legal uncertainty.
An emblematic example of this is Civil Action No. 1987022-96.2010.8.13.0024, pending before the Court of Justice of Minas Gerais, filed in 2010 by the State Public Prosecutor's Office against the Loteria do Estado de Minas Gerais – LEMG and the Consórcio Intralot, the latter being the winner of International Public Competition LEMG 001/2009, which aimed to "grant services for the implementation and operation of online/real-time gaming systems."
At the core of the discussion was whether the State of Minas Gerais had the competence to promote the exploitation of services, contrary to the limitations imposed by Decree-Law No. 204/1967. After traversing all applicable procedural instances, it was only in November 2023, more than three years after the Supreme Court's decision, that the Public Prosecutor's Office recognized the supervening res judicata on the merits discussed in the case, recommending upholding the primacy of the merits judgment and dismissing the initial request.
Notwithstanding the judgment leaning towards the complete preservation of the effects of the concession contract signed by LEMG with the Intralot Consortium, for more than a decade, this contract was plagued by legal uncertainty arising from the existence of a Civil Public Action that sought its annulment, as well as the potential need for responsible parties to pay compensation corresponding to the amounts collected from exploiting the services at the state level. This represents a staggering figure, especially considering that the request did not disregard the prizes paid to Minas Gerais bettors.
Despite heading towards a scenario of dismissal, it is impossible to ascertain what the procedural outcome would have been if the final judgment of the case had occurred prior to the Supreme Court's ruling. This text aims to reflect on the practical consequences of the current legal uncertainty since similar questions could affect municipal operations. An eventual determination of contractual nullity or the risk of compensation payment due to such nullity represents a significant risk to bettors, lottery operators, and even municipalities.
Considering the practical effects that should be weighed by the judge (art. 20 of the LINDB) in the event of questioning the exercise of this competence, there are indeed justifications for its preservation, at least for contracts entered into thus far.
This is because, even if municipal incompetence and the consequent nullity of the contracted instruments are acknowledged, to avoid exacerbating legal uncertainty over a service with a clear social bias, it would fall to the Supreme Court to exercise its power-duty to modulate the effects of the decision. This would prevent bettors from seeking refunds for the amounts bet, which would have perverse effects not only on lottery operators but also on the treasury itself since a portion of the net revenue from activities is intended for assistance actions and programs.
From the perspective of Law 8.987/1995 and considering that municipal operations are materializing under the common concession regime, a decision that does not adequately modulate would impose an additional burden on the granting authority, as it would have to annul the concession, with additional compensation to operators for non-amortized or depreciated investments.
In the current scenario of municipal lotteries, legal uncertainty prevails to such an extent that bettors might say they are "playing the lottery" when deciding which lottery to choose. Municipal lottery operators are on a tightrope, not knowing if they are treading on firm ground or quicksand. Finally, municipalities are racing against time since an eventual modulation could be restricted to services not yet inaugurated if the hypothesis of incompetence prevails. The only certainty regarding this instability is that everyone loses.
(1) In the leading vote of the decision, Justice Gilmar Mendes exemplifies the legitimacy of municipal entities to exploit lottery services by stating that “state (or municipal) legislations that establish lotteries in their territories merely exercise the material competence granted to them by the Constitution.”
(2) In a concurring vote by Justice Alexandre de Moraes, it is noted, in our view, the possibility of exploiting lottery services at the municipal level, on the grounds that the Union could not reserve for itself, in exercising its legislative competence, the exploitation of services, establishing distinctions between federative entities to its own privilege, given the lack of express prohibition imposed on states and municipalities in the Federal Constitution: “In other words, here, Mr. President, those who have the power, the real power to regulate, to establish the entire lottery system, is the Union, exclusive competence. By establishing this, those who can exploit are not just the Union. States and municipalities can, provided they strictly observe federal regulations.”
(3) Municipalities such as Anápolis (GO), Belo Horizonte (MG), Caxias do Sul (RS), Cuiabá (MT), Embu das Artes (SP), Guarulhos (SP), Pelotas (RS), Porto Alegre (RS), and São Vicente (SP) have established their own lotteries through legislation.
Caio Figueiroa
Master's student in Public Law (2018) and Specialist in Administrative Law (2016) from the São Paulo Law School of Fundação Getúlio Vargas (Direito GV). MBA in PPPs and Concessions (2023) from the School of Sociology and Politics of São Paulo (FESPSP). Vice-President and Communication Director of the Brazilian Association of Administrative and Economic Law (Abradade). Professor and researcher at the Foundation Institute of Economic Research – FIPE. Lawyer in Public Law, with an emphasis on Infrastructure and Regulation (transportation, logistics, and construction).
Eduardo Cruz
Specialist in Infrastructure, Concessions, and PPPs from PUC Minas (2022). Law graduate (2013) from the São Bernardo do Campo Law School (FDSBC). Works in the area of Infrastructure and New Business, with a focus on modeling and structuring partnership projects in the sectors of urban mobility, electronic ticketing systems, and lotteries.
