The Federal Supreme Court (STF) has ordered the Rio de Janeiro State Lottery (Loterj) to stop its licensed operators from accepting bets nationally. This preliminary decision was passed by the court on 2 January.
STF minister André Mendonca issued this response to the Original Civil Action No 3,696, which was filed by the attorney general’s office (AGU) in October 2024. The request relates to a long-standing disagreement between Lottery, the state regulator in Rio, and the federal government over Loterj’s regulatory jurisdiction in Brazil.
The latest decision suspends Loterj’s right to allow state-licensees to operate public lottery services nationwide for up to five years, under the Loterj Accreditation Notice 01/2023.
Mendonca’s decision will restrict Loterj-licensed companies from operating throughout Brazil and reintroduces the mandatory use of geolocation tracking to ensure state lotteries’ activities are restricted to their territories.
Loterj will have five days from 2 January to halt their nationwide activities and reestablish geolocation mechanisms. Previous amendments to Loterj’s rights ended the requirement for geolocation tracking. Mendonca believes these were to the detriment of the country.
Mendonca’s preliminary injunction will now go to the STF plenary to be addressed between 14 and 21 February. It will then face a referendum via a virtual session.
But the battle looks far from over, with Mendonca’s decision also providing Loterj the right to contest his action. Once Loterj’s response is received, a hearing will be held to consider Loterj’s argument, after which the AGU will also be given a view of the case for it to provide a response.
Big blow for Loterj in Brazil
Mendonca’s decision is the latest move in what has been a lengthy back-and-forth between Loterj and the federal government.
But it’s a big boost for the government, with Mendonca banning Loterj from establishing any new regulations that would allow its licensees to provide services outside of Rio de Janeiro state borders.
The federal legal online betting market went live on 1 January. At the time it was reported that some Lottery licensees, like Esportes da Sorte continued to operate throughout Brazil, despite not yet receiving a federal licence. These operators believed they were protected by Loterj’s Accreditation Notice 01/2023.
Mendonca said: “The relaxation of the criteria weakens the supervision and control of lottery activity, [potentially harming the federative pact].”
While Mendonca accepted states have the right to offer lottery activities, he stressed the federal government ultimately has the power to oversee these activities.
Differences between a federal and Loterj betting licence
Mendonca’s ruling is also a setback for operators who wished to operate nationally despite not having the federal authorisation to do so.
While the federal licence fee costs BRL30 million (£3.9 million/€4.7 million/$4.8 million) for five years, Loterj authorisation for the same timespan costs only BRL5 million.
Additionally, the tax rate mandated by a federal licence is 12% of gross gaming revenue (GGR), compared to 5% for a Loterj licence, while the Rio de Janeiro lottery also has less restrictive regulations and costs on compliance.
Federal licensees must also go through rigorous due diligence and meet many specifications required by the national regulator, the SPA.
Loterj previously claimed to have the “best cost-benefit” ratio in terms of online betting licences, though this new STF decision will no doubt damage the validity of that assertion.
