As we have all been following in the general media, and especially in GMB itself, telecommunications companies are shutting down the websites of fixed-odds betting operators ('bets') across Brazilian territory. Consequently, numerous betting houses are ceasing to register bets and pay out winnings to Brazilian bettors, which undoubtedly harms the sector's credibility.
Such events are the result of what was determined by the Federal Regional Court of the 1st Region in Process nº: 1015703-46.2024.4.01.0000. In this demand, Loterj (Rio de Janeiro State Lottery) legitimately requests, it is worth highlighting, the blocking of all lottery operator platforms that do not have authorization to explore such activity in the territory of the State of Rio de Janeiro.
So you might ask: without delving into legal intricacies, what is the easiest way to allow these operators (both national and international) to continue operating until December 31, 2024, the deadline set by the Ministry of Finance? The answer we arrived at is relatively simple: a decree by the Ministry of Finance itself. Now let's explain this in a summarized manner.
By the constitutional principle of non-intervention established in Articles 34 and 35 of the 1988 Constitution of the Republic (CR/88), which, when interpreted in the specific case, results in the rule that one federative entity cannot intervene in the public lottery service of another. Consequently, considering the exploitation of fixed-odds betting as a public service of the Federal Union, whose jurisdiction covers the entire national territory, it would suffice for the Ministry of Finance to issue a decree stating the following:
- Art. 1: All fixed-odds betting operators currently operating in the country are authorized to do so until December 31, 2024.
- Art. 2: After the date indicated in the previous article, only operators expressly authorized through the proper administrative process will be allowed to operate throughout the national territory.
With this simple ordinance, it seems to us that the ongoing actions currently stirring in the country would lose their basis, and the states, which are acting legitimately in their interests, we repeat, will have to reconsider their blocking actions until 12/31/2024. This is because all bets would be expressly authorized until the date established in Decree SPA/MF No. 827/24.
- Article 24. For the purposes of the sole paragraph of Article 9 of Law No. 14,790 of 2023, the adjustment period for legal entities that were operating in Brazil at the time of the publication of Law No. 14,790 of 2023, to the current legal and regulatory provisions on fixed-odds betting lotteries, begins on the date of publication of this decree and ends on December 31, 2024.
It should be noted that the aforementioned Ordinance did not authorize betting operators – we even consider it possible to interpret it as a tacit authorization, but reading the set of rules published by the aforementioned ministry, it seems to us more like a period of leniency by the Federal Government. Therefore, an ordinance with an express and general authorization would dispel any doubts about the ability of betting operators to operate at this time.
So that was the suggestion made and we believe that it can be forwarded to the Ministry of Finance by the associations and institutes that already work in favor of the gaming industry in Brazil, due to its legitimacy and representativeness.
That said, let us take the opportunity to make some small clarifications from a legal standpoint.
The first point is that the States can request the blocking of those operators that do not have their own authorization from the State or the Federal Union. This is because if you do not have the authorization of one or the other, the operator is, strictly speaking, covered by the famous Decree-Law no. 3.688/41 (art. 51. Promoting or having lotteries drawn without legal authorization...). In other words, local or national authorization is required. It is, therefore, a matter of compliance.
What's more! If we look at the legislation at the state level, we will find provisions that determine that state agencies block the activities of all those who do not have the proper legal authorization. For example, let's look at §3 of art.2 of Law No. 12.703/23 of the State of Paraíba:
- §3º LOTEP, in compliance with the Constitution of the Federative Republic of Brazil, §1º of art. 25, which establishes the constitutional principles of legal reserve and supremacy of the public interest, which guide the distribution of powers, will exclusively explore throughout the territory of Paraíba the public service referred to in the caput of this article, without prejudice to the competence of the Union.
In the same direction, we have the Sole Paragraph of art. 14 of Decree No. 15,952/22 of the State of Mato Grosso do Sul:
- Sole Paragraph. No lottery modality provided for in this Decree may be operated in the territory of the State of Mato Grosso do Sul without the permission or authorization of SEFAZ, except when operated by the Federal Union, in accordance with the law.
And to conclude this illustration, in Rio de Janeiro we have Decree No. 48,806/23, which in its art. 6 determines:
- Art. 6 - In the State of Rio de Janeiro, the offer and carrying out of advertising and commercial propaganda of electronic sites and legal entities or individuals that offer or have as their objective the operation of lottery modalities without the authorization of the Lottery of the State of Rio de Janeiro - Loterj or authorization of the Federal Union is prohibited.
That is why we said that the States act legitimately, not only by determination of their own legislation, but also in preserving their revenues, which come from the exploitation of their public lottery services.
Another point that is always worth remembering is the scope of the Federal Union's competence to establish rules of a “general nature” on the exploitation of the public service in question.
The unanimous decision of the Federal Supreme Court (STF) in September 2020 confirmed the understanding that the Federal Union is not entitled to a monopoly or any market reserve with regard to public lottery services, nor to determine to the other entities of the Federation how they will exploit the service of which they are holders.
This is clear in the decision of Justice Gilmar Mendes, as it is also clear that each entity of the Federation has its administrative autonomy over its public service. This assertion appears repeatedly throughout the aforementioned Decision, but since the subject still seems unknown to many, let us look at the following excerpt from the decision:
“(...) This is because art. 22, XX, of the Constitution grants the Union exclusive authority only to legislate on the matter. Since the authority provided for is only formal, this provision cannot be given an extended interpretation to also generate an exclusive material authority of the federative entity, which is not included in the exhaustive list provided for in art. 21 of the Constitution”. In simpler terms, what is treated in federal law as a public lottery service, it will be up to the other entities to further develop their respective operating models. Hence, the same Minister concludes: “(...)
Such state norms, whether laws or decrees, would only offend the Federal Constitution if they instituted a discipline or modality of lottery not provided for by the Union itself, given that, in this case, the state legislation would deviate from its materializing character of the public service that the State (or municipality, or Federal District) is the holder of, which is incompatible with art. 22, XX, of the CF/88” (our emphasis).
In short, the States can explore the same modalities as the Federal Union, ensuring a symmetry of opportunities and each one can choose the way to execute its lottery services (material competence).
This means that it is up to the federative entities in question to choose the model for selecting the delegation, the result of this selection, the compensation they will charge for delegating a service under their ownership, the regulation of the operation of the service in their jurisdictions and all other activities (including peripheral ones) that will influence the performance of the respective public lottery service.
All of this is a consequence of the federative arrangement, which is, in turn, a constitutional clause (art. 60, § 4º, I of the Constitution of 1988) and has the aforementioned prohibition of intervention (art. 34 of the Constitution of 1988) as one of its pillars. Therefore, in order to ensure such a political and administrative arrangement, only the Constitution itself establishes an exhaustive list in which the Federal Union is allowed to seek to intervene in the States.
This also means that there can be no indirect intervention (see, for example: IF 114, rel. min. Néri da Silveira, j. 13-3-1991, P, DJ of 27-9-1996 or ACO 3427 MC-Ref, rel. Edson Fachin, j. 24-09-2020, P, DJE of 14-12-2020). In short, a federative entity cannot regulate each other's public services.
Therefore, it seems to us that the Ministry of Finance has the authority to expressly and generally authorize, even if momentarily, the exercise of the exploration of its public service related to the exploration of fixed-odds betting, through an ordinance, allowing the pacification of the understanding about the activities of the current operators throughout the national territory.
Marcello Corrêa
Specialist in government relations, lawyer and master in Political Science. 1st. Vice-President of the Special Committee for Sports, Lotteries and Entertainment of the OAB-RJ; Member of the OAB-DF Games Committee; Consultant at Axis Veritas Consultoria; and former Legal Director of the Rio de Janeiro State Lottery.
