Loterj president criticises ban on nationwide activities in Brazil

Hazenclever Lopes Cançado, the president of the Rio de Janeiro State Lottery (Loterj), has publicly condemned the recent Supreme Federal Court (STF) ruling that imposes restrictions on licensees from operating throughout Brazil. Cançado expressed concerns that this decision fosters “unfair competition” from operators based in tax havens, potentially destabilizing the legal betting framework in the country.

Earlier this month, STF Minister André Mendonça issued a preliminary ruling that prohibits Loterj licensees from accepting bets beyond the boundaries of Rio de Janeiro state. Furthermore, the ruling mandates the implementation of geolocation technology to ensure compliance with this restriction.

Loterj’s appeal against this decision was dismissed on January 7, with Minister Mendonça asserting that the agency’s disagreement does not constitute sufficient grounds for contestation.

Cançado fears that the STF’s ruling compromises the integrity of Brazil’s newly established legal betting market, which officially launched on January 1. He articulated his concerns in an article published in Migalhas, emphasizing the implications of “legal uncertainty” on the market’s viability.

“The lack of clarity in Brazilian betting law exposes vulnerabilities, introduces unfair competition, and imposes bureaucratic hurdles that stifle economic growth,” Cançado stated. He highlighted that this environment not only benefits informal operators but is also perpetuated by governmental actions that contribute to legal ambiguities, subsequently fostering an underground betting economy.

Loterj’s Position on the Matter

Loterj’s appeal was grounded in claims of “defects, omissions, and material errors” within Mendonça’s ruling, which it argues could significantly decrease the state’s tax revenue and disrupt the licensed betting ecosystem in Brazil.

The agency also pointed out that the ruling’s requirement for geolocation monitoring stemmed from Law No. 14,790, which was enacted in December 2023—six months after the issuance of Loterj’s Accreditation Notice 01/2023. This notice indicated that an “express declaration and consent of the bettor” was sufficient for bets to be classified as being placed within state borders.

Furthermore, Loterj contends that Minister Mendonça was misled by the federal oversight, noting that there were no previous obligations related to geolocation for their licensees. “In simpler terms, given the logical consistency of the regulatory framework, prior actions taken by Loterj, guided by their Accreditation Notice 01/2023, should be preserved as they predate this ruling, which lacked territorial stipulations,” Cançado argued.

Cançado further critiqued the Brazilian administration’s approach, asserting that it undermines the social principles of free enterprise that are foundational to the legalization of betting in Brazil.

Impending Challenges of Overregulation

Operators licensed by Loterj have generated over BRL 100 million (£13.3 million/€15.8 million/$16.1 million) in tax contributions to the federal government. However, Loterj fears that these contributions, alongside the integrity of the Brazilian betting market, will come under threat if the STF ruling goes unchallenged amidst competition from tax haven operators.

Currently, Brazil has 14 companies with full licenses to operate within its gambling market, alongside 54 more holding provisional authorizations. These operators are given a window of 30 days to ensure compliance with full certification of their betting systems.

“The federal government, through excessive regulatory measures and its own inefficacies, supported by the judiciary, has created a hostile regulatory atmosphere for legalized betting. Stricter standards are imposed on local operators while illicit entities based in tax havens operate unregulated, free from Brazilian laws and tax obligations, thus contributing to tax evasion,” Cançado elaborated.

Loterj warns that this “uneven landscape of mistrust and insecurity” is detrimental not only to operators within Brazil but to bettors as well. Continuous overregulation threatens to drive both players and legitimate operators towards the unregulated black market, undermining the very purpose of legalizing betting in Brazil.