The Rio de Janeiro State Lottery (Loterj) is requesting a preliminary injunction to reject a lawsuit by the government seeking to ban its licensees from operating outside the state. This is the latest in a legal back-and-forth between the government and the state regulator, after the attorney-general filed a lawsuit last week with the Supreme Federal Court. Loterj is disputing the lawsuit, arguing its licensees have jurisdiction to operate nationally.
In October the Federal Regional Court ruled in favour of the attorney-general’s office (AGU), overturning a ruling that allowed state-licensed operators to provide betting outside of Rio state borders. But Loterj maintains its licensees have the right to operate throughout Brazil.
The government’s latest lawsuit, signed by the AGU and filed on Friday (11 October), is looking to restore its right to regulate gambling across Brazil, overthrowing old rules that Loterj says gives it the power to regulate nationally. Brazil’s legal betting market is set to go live on 1 January 2025.
In quotes shared with Folha, the AGU says Loterj is acting beyond its jurisdiction. It also claims Loterj’s regulations on anti-money laundering and counter-terrorism financing aren’t sufficiently effective.
“The action at a national level disobeys the rules of the ministry of finance and invades the Union’s jurisdiction by operating lottery services throughout the national territory,” the AGU said.
Loterj has responded by filing a request for a preliminary injunction calling for the ban on nationwide activities for Loterj-licensed brands to be lifted.
The Loterj response
In the document, Loterj claims it’s vital to clarify the “deliberate distortions” being made by the government, particularly relating to the Loterj Accreditation Notice 01/2023, which allows accredited legal entities to operate public lottery services for up to five years.
Loterj insists the government has facilitated the black market’s growth by delaying regulations for legal betting and gaming.
“It is important to emphasise that it is precisely the Union’s conduct that has created an environment conducive to illicit practices, including money laundering,” Loterj explained.
The state regulator also criticised the Secretariat of Prizes and Bets’ (SPA) publication of a list of operators and brands approved to continue doing business ahead of the legal market launch.
In Loterj’s view, the register creates a “dangerous precedent” of allowing operators to offer gambling without full authorisation.
It says there are some companies on the list that are based in tax havens and that the SPA hasn’t done enough to fully assess the approved companies. This, Loterj claims, could increase money laundering and other crimes related to illegal gambling.
What happens now?
Should the government’s lawsuit be successful, Loterj predicts tax revenues will be lost immediately. It could also create a dangerous and confusing environment for bettors due to lack of “effective oversight” over who is operating.
The government’s Supreme Court lawsuit flagged Esportes da Sorte, an operator which was denied federal approval to operate as it is embroiled in a money laundering lawsuit. However, Esportes da Sorte’s parent company acquired majority shares in Loterj-licensed ST Soft on 8 October, giving it access to operate at least in Rio de Janeiro.
While it remains to be seen whether Loterj’s request for a preliminary injunction will be granted, it maintains its licensees can continue to operate throughout Brazil.
Loterj claims its operations are protected by Article 35-A of gambling regulations Law No 14,790, which clarifies licensees must follow law ahead of ordinances or injunctions.
