The format defined by Loterj (Lottery of Rio de Janeiro) has caused discomfort in the states and in the Lula (PT) government. The Ministry of Finance informed  that it is evaluating measures to be adopted, but so far has done nothing concrete.

The ministry headed by Fernando Haddad is in charge of the process of federal regulation of the betting market. This is an effort that has been underway since last year, amid the government's attempt to raise revenue from a billion-dollar market.

In the middle of last year, the government issued a provisional measure that was later converted into law, with general guidelines for the accreditation of bookmakers and taxation rules.

The offer of sports betting sites has been authorised in Brazil since 2018, following a law passed by the Michel Temer (MDB) government. Since then, betting adverts have dominated free-to-air TV, especially during football matches. Social networks were flooded with adverts.

The government of Jair Bolsonaro (PL) had four years to regulate the market, but failed to do so. As a result, the number of bookmakers aimed at the Brazilian public exploded without any clear rules for operation or supervision.

A decision by the Supreme Federal Court (STF) in 2020 gave impetus to the operation of state lotteries, which are also advancing in the online betting format. Rio, which has had a lottery since 1975, and Paraná are the most advanced in this type of accreditation. States like Paraíba and Maranhão are also ahead of the curve.

In 2020, the STF consolidated its understanding that states and municipalities can operate lotteries, based on two lawsuits that questioned the Union's exclusivity in this service. The lawsuits did not deal exclusively with online betting, but with modalities regulated by the federal government - thus, exploitation by states can occur as long as the limits placed by federal legislation are observed, which, since 2018, welcomes online betting.

Because it deals with the rights of federal entities, the territoriality of the activities is emphasised in the vote of the STF's rapporteur, Justice Gilmar Mendes, whose position was followed by the court. "It seems right to me to infer that state (or municipal) legislation that establishes lotteries in their territories only conveys the material competence granted to them by the Constitution," says the vote.

The five companies accredited in Paraná only operate in the state's territory and maintain georeferencing locks for users. However, this is not the case with the companies in Rio.

Today, Apostou.com, Bestbet, Marjosports and Pixbet are accredited. Another three are in the process of being accredited: 1XBet, Lema and Laguna. The state has a deadline for new accreditations, which expires at the end of this month.

To become accredited in Rio, companies pay a fee of usd 1 million, plus percentages on bets. In the federal process, this amount is usd $6 million.

"Loterj maintains a dialogue with all spheres of the public and private sectors, as well as the control bodies, cherishing a federative and democratic environment," the Rio lottery said in a statement. The body is headed by lawyer Hazenclever Lopes Cançado, who has a history of working with politicians from the PL, the party of Rio governor Claudio Castro and also former president Bolsonaro.

In the public notice that accredited the companies, Rio stipulated that the bets must only inform that the betting operations are carried out in the state, without any geolocation restrictions for bettors. The territorial restriction was removed by a rectification to the public notice.

The notice was launched in April 2023 and the rectification took place on 26 July last year. One day after the federal government issued the provisional measure that was later converted into law.

Rio ignored questions on this and other points, including from Caixa Econômica Federal. "This rectification [which eliminated the principle of territoriality] implies legal insecurity and affronts the applicable legislation, which restricts the possibility of operating state lotteries to the territory of the respective state," Caixa argued in a request to challenge the rectification.

In denying the measure, Loterj argued that it favoured the potential for revenue. "The state, in the form of Loterj, in rectifying the Public Notice, observes the constitutional principle of efficiency (art. 37), which, in this case, means earning the most revenue for the treasury," Loterj defended at the time. The government predicted an annual turnover of R$213 million from online sports betting.

Rio's position is seen as having the potential to destabilise the market, which is in the process of being regulated, causing judicialisation and a tax war, according to people involved in the process within the government and also linked to companies seeking accreditation. Over the last few months, the Ministry of Finance has received representatives from nine states who complained about Rio's licence.

The president of the Brazilian Institute for Responsible Gaming, André Gelfi, says that the situation generates apprehension among companies, but after the law was passed, this became something secondary in the sector.

"The law pacified that the autonomy of the states is state. If there are any practices that don't comply with the law, everyone draws their own conclusions. I can't detail the implications, but it's something that violates federal law."

"If the states and the federal government don't get their act together, the situation will end up in the Supreme Court again," says lawyer Caio de Souza Loureiro, who works in this area at Tozzini Freire Advogados.

Politicians from the centrist group have been putting pressure on the Ministry of Finance to have some control over the accreditation processes for bookmakers. The pressure led by House Speaker Artur Lira (PL-AL) and Sports Minister André Fufuca (PP-MA) was crucial to the resignation of José Francisco Manssur from the Finance Ministry.

He was tipped to take over the new Betting secretariat created in the ministry. The secretary has yet to be appointed.

Lira was approached and, through his adviser, said he was unaware of the matter. The Ministry of Sports indicated that there was no pressure regarding positions or regulations.

By Paulo Saldaña