Unfair competition in the Brazilian ‘Bets’ (as the operators are called) market undermines entrepreneurship, weakens the national economy, and is supported not only by informal operators but also by the public administration itself, which systematically fosters legal uncertainty, thereby encouraging illegality.
An example of this is the ACO - Original Civil Action 3.6961 filed in the STF by the Federal Government against the State Lottery of Rio de Janeiro (Loterj). In this case, Minister André Mendonça, the case's rapporteur, issued a provisional decision during the judicial recess (January 2, 2025), requiring Loterj to cease within five days the "operation of lottery and electronic gaming activities beyond the territorial limits of the State of Rio de Janeiro." He based his decision on a subsequent rule proclaimed by the Federal Government, which was distorted and has no basis in law.
While this case is not the main focus of this analysis, it serves as an illustrative stumbling block.
In summary, the Federal Government argues that Loterj, under threat of violating the federal pact, must employ "georeferencing technology to block betting attempts from individuals in other federal units." They claim that Loterj’s model of requiring a declaration and acknowledgment from bettors, affirming that their ‘Bets’ will be considered as made in Rio de Janeiro for all legal purposes, does not satisfy territorial criteria. According to these criteria, state-run lottery services must be restricted to their respective territories, while only the Federal Government may operate at a national level.
However, in Brazil, where legal security often seems like a mere façade, Minister Mendonça, misled by the Federal Government, overlooked that the territorial limitation rule was created only by Law 14,790 of December 29, 2023, published on December 30, 2023. This occurred nearly six months after Loterj adopted its simple declaration and acknowledgment model.
In fact, Loterj implemented this model following its Call for Accreditation Notice 001/23, published on April 25, 2023, and amended on July 26, 2023.
At that time, there were no territorial limitations for providing the service, no georeferencing requirements, and no criteria for bettors’ location or residence. Even with the introduction of territorial limitations through Law 14,790/23, this law still did not mandate georeferencing mechanisms, leaving regulation to the states. Despite this, Minister Mendonça ruled against Loterj, including the "reinstatement of mandatory geolocation mechanisms."
Indeed, Brazil is not for amateurs.
For those who remember, Law 13,756/2018 legalized fixed-odds online betting in Brazil and gave the Ministry of Finance up to two years, extendable by another two, to regulate the activity. However, the Federal Government remained inert, taking over five years to issue Law 14,790/23, which introduced the novel territoriality requirement at a time when Loterj was already operating under its Call for Accreditation Notice 001/23.
Given the government’s delay in fulfilling its duty and, more importantly, considering the natural consolidation of pre-existing legal relationships over time, such as Loterj's, Law 14,790/23 included an intertemporal clause in §8 of Article 35-A of Law 13,756/18 to protect acquired rights and perfected legal acts.
Under the terms of this clause, "all concessions, permissions, authorizations or direct explorations promoted by the States and the Federal District based on authorized procedures initiated before the publication of provisional measure 1,182, of July 24, 2023, are preserved and confirmed in their own terms, thus understood as those whose first corresponding public notice or call was published in data prior to the issuance of said provisional measure6, regardless of the date of the effective completion or issuance of the concession, permission or authorization, respecting the acquired right and perfect legal acts”.
It is worth noting that, besides not establishing any territorial limitations or requiring georeferencing mechanisms, Provisional Measure 1,182/23 expired without being converted into law.
Logically, then, the past acts of Loterj, governed by its Call for Accreditation Notice 001/23 and predating the Executive Order, which did not impose any territorial restrictions, should have been safeguarded. Right? Well, that’s not how the Brazilian administration sees it, as evidenced by its ongoing actions that contradict the social values of free enterprise that underpinned the legalization of betting in Brazil.
In practice, while operators accredited by Loterj have already paid over R$100 million (US$ 16.3m) in federal taxes to the Federal Government, the government itself, using creative interpretations and its own misconduct—with judicial endorsement—creates a hostile environment for regulated ‘Bets’. Meanwhile, countless operators based in tax havens and China, immune to Brazilian law, continue to operate without adhering to the same competitive conditions, freely conducting business without paying federal, state, or municipal taxes, thereby contributing to tax evasion.
In this unequal, distrustful, and uncertain scenario, the biggest losers are not Loterj and its accredited operators but the entire nation. The country remains tethered to backwardness, victimized by over-regulation and an endless partisan-governmental obsession with artificial power centralization and market reserves, always to the detriment of the ultimate recipients of public services—the people, the individuals, the citizens.
Unshackling Brazil from irrational and cumbersome bureaucratic restraints—including numerous administrative, judicial, political, economic, and legal barriers to free enterprise—should be seriously pursued as a strategic national interest. As Milton Friedman and Ludwig von Mises, renowned economists and influential advocates of economic liberalism, argued: "Economic freedom is, by itself, an extremely important part of overall freedom," and "the most prosperous nation will be the one that has placed no obstacles to the spirit of free enterprise and private initiative."
Hazenclever Lopes Cançado
President of Loterj
Source: Migalhas
