Court suspends blocking of Rio operators without Loterj licence

Rio de Janeiro Federal Regional Court Decision: Unlicensed Betting Platforms Continue to Operate

In a significant ruling impacting the gambling landscape in Brazil, the Rio de Janeiro Federal Regional Court of the First Region has determined that betting platforms operating in the state without a license from the Rio de Janeiro State Lottery (Loterj) may continue their activities. This decision comes as a response to an appeal filed by the National Association of Games and Lotteries (ANJL), which sought to reverse a previous federal ruling aimed at blocking operators without proper licensing from Loterj.

The court has mandated that Anatel, Brazil’s National Telecommunications Agency, adopts “appropriate measures” to restrict access to sites of operators who have not secured a license from Loterj. This decision aims to bolster the Rio de Janeiro government’s efforts to combat money laundering and eliminate unlicensed competition, thereby protecting compliant Loterj-accredited operators.

However, following ANJL’s appeal, federal judge Pablo Zuniga Dourado has “partially” accepted the request, suspending the initial ruling to block these websites. In his justification, Zuniga referenced the impending deadline of December 31 for federal license applications. ANJL argued that this “transition period” necessitates allowing operators to apply for licenses while continuing to operate as usual. The court agreed with this perspective, stating, “I partially accept the motions for clarification, with infringing effects, to remedy the omission and determine the suspension of the decision that partially granted the advance relief.”

Operators Have Until December 31 to Secure Licenses

In May, the Brazilian government issued Normative Ordinance No. 827, which delineates that operators have until December 31, 2024, to obtain the required authorizations for operations. Approved operators will be granted licenses that are valid for five years upon payment of a fee amounting to BRL 30 million (approximately £4.6 million/€5.4 million/$5.9 million). Failure to secure such licenses by January 1, 2025, will lead to significant repercussions.

Normative Ordinance No. 1,233 outlines the sanctions imposed on operators found to be non-compliant, including fines between 0.1% and 20% on the proceeds from the previous year, capped at an astounding BRL 2 billion. Furthermore, violators could face a ban from acquiring or holding a license for up to ten years. The sub-secretariat for monitoring and inspection of the SPA will initiate proceedings, forwarding the case to the sub-secretariat for sanctioning to determine appropriate punitive measures.

Udo Seckelmann, head of gambling and crypto at Bichara e Motta Advogados, articulated concerns about the severity of the BRL 2 billion fine, describing it as “too harsh.” Still, he acknowledged its potential effectiveness as a deterrent: “The intention behind such a significant fine is likely to instill caution among operators, ensuring they avoid infringements,” he advised in an interview with iGB.

Is Loterj Overstepping Its Authority?

Loterj has been under scrutiny for allegedly exceeding its jurisdiction. While operators with Loterj accreditation can operate nationally, the legal gambling market in Brazil has yet to be fully established. In contrast, other state lotteries restrict operators to activity within their respective borders.

The Brazilian Institute for Responsible Gaming (IBJR) has criticized Loterj’s approach, deeming it a “clear violation” of federal regulations. They argue, “The actions of Loterj create chaos, generate undue confusion, and impede the regulation of the fixed-odds betting industry in Brazil.”

André Santa Ritta, an associate lawyer at Pinheiro Neto Advogados, supports IBJR’s position. He commented, “IBJR raises valid points, and their arguments are well-founded. I have actively participated in discussions around this, and I do not believe Loterj possesses the legal authority to permit companies to operate across the entire country.”

This ongoing debate illustrates the complexities and evolving nature of Brazil’s regulatory framework in the gambling sector, highlighting the need for clarity and alignment with federal laws as the industry matures.