Analysis of regulatory implications and State autonomy
Brazil is facing a new chapter in the regulation of lotteries, specifically sports betting, with Direct Action of Unconstitutionality (ADI) 7640[1] under review by the Federal Supreme Court (STF), with Minister Luiz Fux as the rapporteur.
Context of the dispute
This action was initiated by the opposition from the states of São Paulo, Minas Gerais, Paraná, Acre, Mato Grosso do Sul, Rio de Janeiro, and the Federal District. They specifically challenge § 2 and the phrase "and advertising," contained in § 4, both of Article 35-A of Federal Law No. 13.756[2], of December 12, 2018, as amended by Federal Law No. 14.790, of December 29, 2023.
The contested sections define a licensing model that restricts each sports betting operator, or companies belonging to the same economic group, to receive authorization in only one state or the Federal District. Additionally, they impose limitations on advertising that crosses state borders, a situation that has raised conflict-related questions about autonomy and equality among federative entities.
Conflicting views and cooperation
The sports betting market in Brazil is undergoing significant regulatory changes, reflecting various perspectives on the best way to manage the sector.
A notable example of these efforts is the initiative by the Ministry of Finance, which formed a working group within the National Council of Finance Policy (Confaz) to prevent a fiscal war between the states[3].
This group is working to unify the rules for state authorizations for sports betting companies, seeking to balance local needs with national policies, although they face criticism that such measures may limit regional autonomy in favor of excessive centralization.
Currently, there is variability in state policies; for instance, the state of Rio de Janeiro allows betting companies to obtain licenses that, in theory, enable operations nationwide, an approach that contrasts with stricter restrictions in other states.
ADI 7640 reflects this dynamic, representing a significant move by the states to question and potentially reform the norms established at the federal level.
Historic STF decisions and expectations for ADI 7640
Historically, the STF has addressed similar issues in Fundamental Precept Non-Compliance Claims (ADPFs) 492[4] and 493[5], allowing states to manage their own lotteries. The 2020 decision reaffirmed that while the Union has exclusive legislative competence over lotteries, this does not exclude the possibility of state management. Observing the STF's history of decisions, one can speculate about the possible outcome of ADI 7640 regarding decentralization.
The need for federal regulation
Based on these disputes and collaborations, an argument arises for the need for federal regulation that can harmonize the rules, offering stability to the sector and preventing excessive fragmentation.
In this sense, the Secretariat of Prizes and Betting, linked to the Ministry of Finance, has been making continuous efforts to fulfill the sector's regulatory agenda, defined by Ordinance SPA/MF No. 561, of April 8, 2024[6].
An example is the publication of Ordinance SPA/MF No. 827, of May 21, 2024[7], which establishes detailed rules for obtaining authorization for the commercial exploitation of sports betting companies throughout the national territory. This ordinance defines the legal, fiscal, labor, integrity, economic-financial, and technical qualification requirements that legal entities must meet to obtain authorization, as well as the deadlines and administrative procedures.
Preparation and adaptation to the new regulatory scenario
As Brazil navigates the turbulent waters of sports betting regulation, ADI 7640 represents not only a legal challenge but also an opportunity to redefine the sector's future. This moment calls for legislation that not only balances the interests between states and the Union but also promotes a stable and predictable regulatory environment.
Preparation and adaptation to the new regulatory scenario should be priorities for all parties involved. Collaboration among companies, regulators, and the government will be crucial to developing a sports betting market that is fair, competitive, and responsible. This requires an open and ongoing dialogue where all stakeholders contribute to shaping the policies that will govern the sector.
The complexity of this market cannot be underestimated, and thus, the need for rigorous regulatory oversight and strategic planning is more relevant than ever. It is imperative that operators, investors, and regulators are engaged and proactive, ensuring that regulation evolves in a way that protects public interests without restricting the sector's growth potential.
The resolution of ADI 7640 will be a decisive milestone for the future of sports betting in Brazil. Depending on the outcome, it could set a significant precedent for state autonomy regarding the management of their own lotteries while also defining the extent of federal regulatory influence. The sector's ability to adapt and thrive under the new regulation will determine its long-term success on the global stage.
[1] BRAZIL. Federal Supreme Court. Initial Petition of ADI 7640. Available at: https://redir.stf.jus.br/paginadorpub/paginador.jsp?docTP=TP&docID=776633441&prcID=6917578. Accessed on: May 20, 2024.
[2] BRAZIL. Law No. 13,756, of December 12, 2018. Available at: https://www.planalto.gov.br/ccivil_03/_ato2015-2018/2018/lei/L13756.htm. Accessed on: May 20, 2024.
[3] ABEL, Victoria; OLIVEIRA, Eliane. “‘Bets’: To avoid fiscal war, Finance Ministry wants to convince states to unify online betting rules.” O Globo, 2024. Available at: https://oglobo.globo.com/economia/noticia/2024/05/24/bets-para-evitar-guerra-fiscal-fazenda-quer-convencer-estados-a-unificar-regras-de-apostas-on-line.ghtml. Accessed on: May 27, 2024.
[4] BRAZIL. Federal Supreme Court. Judgment of ADPF 492. Available at: https://portal.stf.jus.br/processos/downloadPeca.asp?id=15345265193&ext=.pdf. Accessed on: May 20, 2024.
[5] BRAZIL. Federal Supreme Court. Judgment of ADPF 493. Available at: https://portal.stf.jus.br/processos/downloadPeca.asp?id=15345265231&ext=.pdf. Accessed on: May 20, 2024.
[6] BRAZIL. Ministry of Finance. Secretariat of Prizes and Betting. Ordinance SPA/MF No. 561, of April 8, 2024. Available at: https://www.in.gov.br/en/web/dou/-/portaria-spa/mf-n-561-de-8-de-abril-de-2024-553015529. Accessed on: May 20, 2024.
[7] BRAZIL. Ministry of Finance. Secretariat of Prizes and Betting. Ordinance SPA/MF No. 827, of May 21, 2024. Available at: https://www.in.gov.br/en/web/dou/-/portaria-spa/mf-n-827-de-21-de-maio-de-2024-561240128. Accessed on: May 27, 2024.
Gabriel Quiliconi
Lawyer and consultant in institutional, governmental, and regulatory affairs in São Paulo. Graduated in Law from Mackenzie; Specialist in Contract Law from PUC/SP; MBA in Leadership, Innovation, and Management from PUC/RS.
