Hazenclever Lopes Cançado, president of the Rio de Janeiro State Lottery (Loterj), has criticised the ban on its licensees operating throughout Brazil amid “unfair competition” from companies based in tax havens.
Earlier this month, Supreme Federal Court (STF) minister André Mendonça passed a preliminary decision to prohibit Loterj licensees operating throughout Brazil, while also mandating the use of geolocation tracking to ensure they could only accept bets within Rio de Janeiro state borders.
Loterj’s appeal of the decision was rejected on 7 January, with Mendonça claiming the state regulator’s rebuttal was down to “mere disagreement with the decision under appeal”.
Cançado believes the STF’s actions risk the stability of the legal betting market in Brazil, which launched on 1 January.
“Legal uncertainty in Brazilian betting exposes legal weaknesses, unfair competition and bureaucracy that hinders the market and harms the economy,” Cançado wrote in an article for Migalhas.
“Unfair competition in the betting market in Brazil haunts entrepreneurship, weakens the national economy and has the support not only of informal [illegal] operators, but of the public administration itself, which systematically fosters legal uncertainty and, thus, encourages clandestinity.”
What is Loterj’s argument?
Loterj’s reason for its appeal was the perceived existence of “defects, omissions, obscurities and material errors” in Mendonça’s ruling. The decision could cause a drop in tax revenues for the state and disruption to Brazil’s licensed betting sector, it argued.
Loterj also complains that mandatory geolocation tracking was only created by Law No 14,790 in December 2023, approximately six months after Loterj’s Accreditation Notice 01/2023 was published.
Loterj’s Accreditation Notice established that the “express declaration and consent of the bettor” was enough for bets to be considered as placed within Rio de Janeiro state borders.
The state regulator claims Mendonça has been “led into error by the union”, with no pre-existing requirement for Loterj licensees to utilise geolocation technology.
“In other words, by obvious logic and symmetry of the system, the past acts of Loterj, governed by its Accreditation Notice 01/2023, since they precede the act of the executive branch, which did not foresee any territorial restrictions, should be protected, right?” Cançado said.
“Well, that is not what the Brazilian administration thinks, which once again acts against the social values of free enterprise that underpinned the legalisation of betting in Brazil.”
Threat of overregulation in Brazil
Loterj-licensed operators have contributed over BRL100 million (£13.3 million/€15.8 million/$16.1 million) to the federal government in taxes.
Loterj believes those state contributions will be threatened by the STF’s ruling, as well as the presence of companies based in tax havens and operating in the Brazil betting market.
There are currently 14 companies with full licences to operate in Brazil, as well as another 54 with provisional authorisation. Those operators are given 30 days to ensure aspects such as full certification of betting systems are carried out.
“The union itself, using creationism and its own wickedness, with the endorsement of the judiciary, provides a truly hostile environment for legalised bets, especially because it makes the rules stricter for those within the country, while countless players based in tax havens and in China, immune to Brazilian law, continue to operate without submitting to the same competitive conditions, operating freely in the country without collecting federal, state and municipal taxes, even representing tax evasion,” Cançado added.
In the view of Loterj, this “unequal scenario of distrust and insecurity” will prove most harmful to bettors in Brazil. If overregulation continues, it could drive both players and operators towards the black market.
