Loterj requests injunction after Brazil government files lawsuit
The Rio de Janeiro State Lottery (Loterj) has initiated a legal challenge against a lawsuit filed by the Brazilian government, which seeks to preclude its licensed operators from conducting business outside the state borders. This legal maneuver follows a contentious exchange between the government and Loterj, sparked by the attorney-general’s recent petition to the Supreme Federal Court. Loterj is contesting the government’s stance, asserting that its licensees hold the authority to engage in nationwide operations.
In a pivotal ruling from October, the Federal Regional Court sided with the attorney-general’s office (AGU), thereby reversing a previous decision that permitted state-licensed operators to extend their betting services beyond Rio’s geographical confines. However, Loterj argues that under its licensing framework, these operators possess the right to function on a national scale.
The government’s latest legal action, formally submitted on October 11, aims to reassert its regulatory powers over gambling throughout Brazil, seeking to invalidate the existing statutes that Loterj cites as the basis for its national jurisdiction. With Brazil’s legal betting sector poised to launch on January 1, 2025, the stakes of this litigation are undeniably high.
In statements shared with Folha, the AGU contends that Loterj is overstepping its regulatory boundaries. Furthermore, it criticizes Loterj’s measures concerning anti-money laundering and counter-terrorism financing, suggesting that they are not sufficiently rigorous.
“The action at the national level violates the Finance Ministry’s regulations and encroaches upon the Union’s authority by administering lottery services across the national territory,” emphasized the AGU.
In response, Loterj has filed for a preliminary injunction aimed at rescinding the proposed restrictions on its licensees’ national activities.
The Loterj Response
Within its legal submission, Loterj underscores the necessity of addressing the “willful misrepresentations” purportedly made by the government, particularly surrounding the Loterj Accreditation Notice 01/2023, which allows accredited entities to provide public lottery services for a duration of up to five years.
Loterj asserts that the government’s prolonged delays in enacting regulations for the legal gaming and betting sectors have inadvertently fostered a surge in black market activities.
“It is crucial to note that the Union’s inaction has cultivated an environment ripe for illicit behaviors, including money laundering,” Loterj articulates.
The state regulator has also raised concerns over the Secretariat of Prizes and Bets (SPA)’s recent release of a list of operators and brands permitted to operate prior to the official market launch. In Loterj’s opinion, this register sets a “perilous precedent” by permitting operations without comprehensive authorization.
Moreover, Loterj points to the presence of companies on the approved list that are based in tax havens, criticizing the SPA for not conducting thorough evaluations of these entities. Such oversight lapses, Loterj contends, could exacerbate money laundering risks and other offenses linked to illegal gambling.
What Happens Now?
If the government’s lawsuit prevails, Loterj predicts immediate losses in tax revenues. Additionally, a successful ruling could engender a chaotic landscape for bettors, resulting in ineffective monitoring of operational legitimacy.
The government’s Supreme Court petition has identified Esportes da Sorte, an operator currently entangled in a money laundering lawsuit and denied federal approval. Notably, on October 8, Esportes da Sorte’s parent company acquired a significant stake in Loterj-licensed ST Soft, granting it operational access in Rio de Janeiro.
As the situation develops, it remains uncertain whether Loterj’s call for a preliminary injunction will be granted; however, the state regulator stands firm in its position that its licensees possess the legal grounds to operate across Brazil.
In its defense, Loterj cites Article 35-A of gambling regulations under Law No 14,790, which stipulates that its licensees are to adhere to legal frameworks prior to any ordinances or injunctions that may arise.
