Solidarity party files Federal Court lawsuit to ban municipal lotteries
In a significant development for Brazil’s gambling landscape, the Solidarity Party recently lodged a lawsuit with the Federal Supreme Court (STF), targeting the proliferation of municipal lotteries throughout the country.
On March 12, the social democratic Solidariedade party initiated a Claim of Non-Compliance with a Fundamental Precept (ADPF), seeking the provisional suspension of municipal lotteries while the STF deliberates on their potential violation of the Brazilian Constitution.
The Solidarity party contends that municipal lotteries are engendering a “truly chaotic scenario,” enabling jurisdictions like Bodó to contravene federal regulations by granting licenses to operators lacking federal authorization. This disparity exposes players to varying levels of protection and diminishes tax contributions as compared to those regulated federally.
Brazil encompasses over 5,500 municipalities across its 26 states, with several local authorities attempting to establish their own lottery frameworks to generate revenue. For example, the tiny municipality of Bodó, with a population of just over 2,000, has drawn national attention by issuing licenses to lottery operators at a mere BRL 5,000 (approximately £670.29/€796.81/$867.70). In stark contrast, a national license from the state costs an astronomical BRL 30 million.
The lawsuit posits that municipal lotteries jeopardize the financial stability of Brazil’s newly regulated betting market and compromise player safety, highlighting the inconsistent protective measures across different municipalities.
Consequently, the case calls for an immediate suspension of all municipal lottery laws and the declaration of such regulations as unconstitutional. The regions implicated in this legal action are required to submit information regarding their future operations and strategies.
Municipal Lotteries Under Scrutiny Following Loterj Decision
This latest challenge to regional lotteries follows the ongoing legal struggle faced by Rio de Janeiro’s Loterrj against federal oversight. Loterrj has long asserted its state license should permit operations beyond the borders of Rio de Janeiro, extending throughout Brazil.
However, Loterrj’s aspirations encountered a significant setback in February when the STF upheld a preliminary injunction from Minister André Mendonça that barred the lottery from operating nationwide, mandating geolocation tracking to ensure compliance with state boundaries.
Daniel Romanowski, president of the state lottery in Paraná, previously cautioned that this legal discourse would likely extend to evaluate the licensing capabilities of municipal lotteries in Brazil as well. Romanowski anticipates that municipalities may face a similar fate as state lotteries, with their operational scope confined within regional territories.
Brazil’s Newly Regulated Federal Market
Brazilian online betting markets officially launched on January 1 and are projected to rank among the top three gambling markets globally.
However, the sector faced significant resistance throughout the latter half of 2024, culminating in the Solidarity Party filing another lawsuit with the STF to challenge the constitutionality of federal betting laws.
This legal contention coincided with an Ação Direta de Inconstitucionalidade (ADI) initiated by the National Confederation of Trade in Goods, Services, and Tourism (CNC), Brazil’s third-largest trade union. The STF conducted a two-day hearing to scrutinize the implications of betting in Brazil and evaluate whether the current laws infringe upon constitutional provisions.
A decision from this hearing is anticipated in the first half of 2025, though industry experts generally believe the momentum behind federal legalization will persist, making substantive alterations to existing betting laws highly unlikely.
The ongoing debate regarding non-federal licensing is expected to continue, particularly as Bodó appears to disregard both the legal ambiguities stemming from the Loterj ruling and federal threats to curtail the municipality’s lottery operations.
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