Municipal betting could yield $2 billion a year in Brazil, study says

A new analysis by Leme Consultores estimates that municipal betting could yield federal revenue of BRL 11.6 billion (approximately $2 billion) annually for the Brazilian government.

This comprehensive study was commissioned by the National Association of Municipal and State Lotteries (Analome) and evaluates the economic ramifications of municipal betting in light of the ongoing discussions surrounding its constitutionality in Brazil.

### Legal Challenges and Developments

In March, Brazil’s Solidarity party submitted a Claim of Non-Compliance with a Fundamental Precept, seeking to suspend municipal lotteries. The claim asserted that these local operations disrupt the newly regulated federal online betting market.

Despite these challenges, Supreme Federal Court (STF) Minister Nunes Marques has denied the request for a suspension, allowing municipal lotteries to continue their operations until a definitive ruling is made by the STF.

The findings from Leme Consultores indicate that municipal lotteries could substantially contribute to the Brazilian economy, generating close to BRL 12 billion in annual federal revenue.

### Barriers for Smaller Operators

The study, utilizing existing data from licensed operators in Bodó, a municipality in the state of Rio Grande do Norte, reveals that about BRL 8 billion could originate from smaller companies that struggle to comply with stringent federal requirements.

Entities aspiring for federal licensing face a hefty BRL 30 million authorization fee, as well as rigorous technical and certification specifications.

The analysis highlights that “these barriers to entry—particularly affecting small and medium-sized operators—not only impact competition, but also directly diminish potential tax revenue.”

It further emphasizes that “the high initial and ongoing costs mandated by federal legislation may significantly limit the number of operators capable of contributing tax, undermining the effectiveness of the overall tax system within the sector.”

### The Legitimacy of Municipal Lotteries

The Solidarity party argues that municipal lotteries are fostering a “chaotic scenario” in Brazil, with various jurisdictions circumventing federal betting laws, thereby permitting unlicensed companies to operate.

Contrarily, the study asserts that municipal lotteries represent a legitimate method of decentralizing lottery operations, fostering competition.

“Decentralized lottery models, as seen in the United States, Canada, and Australia, illustrate that the coexistence of local and national lotteries can yield positive outcomes regarding power distribution and tax collection,” the study elucidates.

It continues, “In Brazil, the excessive centralization of lottery operations has resulted in a limited array of offerings and concentrated revenues, hindering numerous regions from reaping the benefits engendered by such activities.”

However, Daniel Romanowski, president of the state lottery in Paraná, warns that municipal lotteries may disadvantage smaller companies unable to secure federal authorization.

“We have approximately 5,000 cities in Brazil,” Romanowski explained. “Cities like Curitiba and São Paulo have robust infrastructures, but many smaller municipalities with populations of around 3,000 might struggle to access quality systems and suppliers for gaming.”

### Conclusion

As Brazil navigates the complexities of its municipal lottery landscape, it is vital to recognize both the potential economic benefits and the challenges faced by small operators. Through informed discussions and strategic legislative actions, the Brazilian gambling landscape can evolve to enhance competition, foster community engagement, and ultimately bolster federal revenue.

In this ever-evolving industry, stakeholders must remain vigilant, adaptive, and forward-thinking to harness the full potential of municipal betting initiatives.