The president of the Rio de Janeiro State Lottery (Loterj), Hazenclever Lopes Cançado, has raised sharp concerns about the latest restrictions on state lottery operators in Brazil. He argues that the Supreme Federal Court’s (STF) decision to ban nationwide operations for Loterj licensees not only harms legal businesses but also fuels “unfair competition” from offshore companies that evade Brazilian tax laws.
The STF Decision That Sparked Controversy
Earlier this month, STF minister André Mendonça ruled that Loterj licensees could only operate within Rio de Janeiro, enforcing geolocation tracking to ensure compliance. The move was framed as necessary to maintain jurisdictional integrity, but Cançado disagrees, labelling it an overreach that creates more problems than it solves.
On 7 January, Loterj’s appeal against this decision was dismissed. Mendonça stated that the appeal lacked sufficient grounds and amounted to “mere disagreement” with the court’s initial ruling.
This development comes just days after Brazil officially launched its legal betting market on 1 January. The timing, according to Cançado, threatens the sector’s nascent stability and risks undermining its potential economic benefits.
The Case Against Geolocation Tracking
One of Loterj’s primary objections lies in the mandate for geolocation technology. This requirement, established in December 2023 under Law No 14,790, postdates Loterj’s own Accreditation Notice 01/2023. The Accreditation Notice had initially allowed bets to be deemed valid within Rio de Janeiro based solely on the bettor’s consent.
Loterj argues that imposing this retroactive requirement undermines the operational framework they had already established. “The administration has acted against the principles of free enterprise that legalised betting in Brazil,” Cançado stated. He further criticised the court’s reliance on arguments from the federal government, claiming they misrepresented key facts.
Economic Consequences and Legal Uncertainty
Cançado warned that the STF’s ruling could reduce tax revenues for Rio de Janeiro, disrupt the betting market, and exacerbate existing challenges in Brazil’s legal framework.
- Loss of tax revenue: Loterj-licensed operators contributed over BRL100 million in federal taxes in recent years.
- Unfair competition: Offshore operators, particularly those based in tax havens, face no equivalent restrictions, allowing them to dominate the market while avoiding taxes.
- Overregulation: Stricter rules for domestic operators could drive them out of business while illegal operators flourish.
Loterj claims that these challenges discourage legal operators from remaining in the market, thus reducing the overall benefits of legalisation.
A Market Battling Offshore Operators
Brazil’s betting market is increasingly characterised by the dominance of companies operating from jurisdictions with favourable tax laws. According to Cançado, these offshore entities pose a significant threat to the regulated market, enjoying freedom from Brazilian legal and tax obligations while competing against licensed operators bound by stringent rules.
As of now, 14 operators hold full licences in Brazil, while another 54 have provisional authorisations. These licensees must comply with strict certification requirements within 30 days, but Cançado argues that the uneven playing field with unregulated entities skews the market further.
“The judiciary has created an environment that punishes legitimate businesses while turning a blind eye to tax evasion and illegal operations,” Cançado remarked.
What’s Next for Loterj and the Betting Market?
The Loterj president’s criticisms reflect broader frustrations among licensed operators navigating Brazil’s regulatory landscape. As the legal betting market seeks to establish itself, questions of fairness, enforcement, and economic impact loom large.
For now, the STF’s decision stands, and Loterj must comply with its terms. But as Cançado’s statements suggest, the battle over the future of Brazil’s betting industry is far from over.
