On Wednesday (12 March), Brazil’s social democratic party, Solidariedade, filed a Claim of Non-Compliance with a Fundamental Precept (ADPF), requesting municipal lotteries to be provisionally suspended, pending a final STF ruling on whether they breach Brazil’s constitution.
The Solidarity party claims municipal lotteries are creating a “truly chaotic scenario”, with jurisdictions such as Bodó flouting federal laws by allowing companies that haven’t achieved federal authorisation to operate within municipalities, largely without the same level of player protection measures and tax contributions as the federal regulator.
Within the 26 states in Brazil, there are over 5,500 municipalities, with some of those seeking to create their own laws establishing lotteries and generating revenue.
For instance Bodó, a municipality with a population barely exceeding 2,000, has become a point of national interest after it issued a number of licences to operators, with each costing just BRL5,000 (£670.29/€796.81/$867.70), in stark comparison to the BRL30 million that is being charged by the state for a national licence.
The Solidarity party’s lawsuit warns municipal lotteries throw the financial stability of the newly regulated Brazil betting market into doubt, as well as risking the safety of players due to the differing levels of player protection measures from each municipality.
As a result, the case calls for the laws governing municipal lotteries to be suspended and the regulations enforced by these entities to be deemed unconstitutional. The regions named in the act have been asked to share information on their future strategies.
Municipal lotteries under the spotlight after Loterj decision
This is the latest strike against regional lotteries, as Rio de Janeiro’s Lotterj has been embroiled in a heated legal battle against the federal government for months.
Loterj has long protested its state licence should allow brands to operate beyond Rio de Janeiro state borders and throughout Brazil.
However, Loterj’s hopes were dealt a potentially fatal blow in February when the STF voted to uphold the preliminary injunction handed down by minister André Mendonça in early January, which prohibited Loterj’s nationwide activities and mandated geolocation tracking to ensure its licensees were only active within the state of Rio de Janeiro.
Daniel Romanowski, president of the state lottery in Paraná, previously warned the next step in the discussion would likely address the other municipal lotteries and their licensing capabilities in Brazil.
Romanowski predicted municipalities would suffer the same outcome as state lotteries, with their activities restricted to within their own borders.
Newly regulated Brazil federal market
The legal Brazil online betting market launched on 1 January and is expected to become one of the top three gambling markets in the world.
The sector faced a lot of opposition over the second half of 2024, though, including the Solidarity party filing a separate lawsuit with the STF calling for federal betting laws to be deemed unconstitutional.
Combined with another ADI (Ação Direta de Inconstitucionalidade) from the National Confederation of Trade in Goods, Services and Tourism (CNC), Brazil’s third biggest trade union, the STF held a two-day hearing to investigate the effects of betting in Brazil and whether the betting laws breach Brazil’s constitution.
The result of that hearing will be confirmed in H1 2025, although the industry consensus is that the horse has bolted and there is little chance of the betting laws being scrapped.
The discourse over non-federal licensing looks set to rumble on, however, with Bodó seemingly ignoring both the legal uncertainty caused by the Loterj ruling and threats from the federal government to ban the municipality’s activities.
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Original article: https://igamingbusiness.com/legal-compliance/solidarity-party-federal-court-municipal-lotteries/
