Last week, the Brazilian Supreme Court (STF) unanimously ruled that the Federal Union does not have a monopoly over the exploitation of lotteries.
The vote provided by Justice Rapporteur Gilmar Mendes clearly confirms the public service nature of the exploitation of lotteries in Brazil and that articles 1 and 32 of Decree-Law No. 204/1967, which grant exclusivity to the Federal Union to offer lottery services, were not embraced by the Federal Constitution of 1988, given that they violate clause 1 of article 25 of the highest law of land. While the STF recognized the Federal Union’s authority, embedded in clause XX of article 22 of the Federal Constitution of 1988, to legislate on consortia and draws (including lotteries), such authority does not preclude the States’ material authority to exploit lotteries and regulate such exploitation.
This decision, not only an important victory for Brazilian states (such as Rio de Janeiro) which have been exploiting their own lotteries, may also potentially impact the regulation and exploitation of fixed odds sports betting in Brazil.
As the gaming and betting industry is aware, Law No. 13,756/2018 legalized fixed odds sports betting, characterizing it as a form of lottery. The regulations of such law are being anxiously awaited by the market after three rounds of public consultation and a lot of speculation, with the Presidential Decree regulating the federal law having been promised by SECAP for the beginning of 2021.
While the Federal Government had initially contemplated adopting the business model of “authorization”, where an unlimited number of licences were going to be made available to all operators satisfying the requirements laid down by the law and its regulations, the Federal Government made a complete U-turn in the third round of public consultation by switching to the “concession” model, where a limited number of licences are to be awarded under a competitive bidding process.
While the Federal Government appears to be adamant in sticking to the “concession” model, the recent STF decision may have provided a loophole and unexpected opportunity for Brazilian states to also exploit fixed odds sports betting under their own rules. Therefore, could the STF decision have potentially jeopardized the work being done by SECAP (which has spearheaded the federal regulation drafting exercise) and opened Pandora’s box?
I reckon we will have to wait and see, and invite any fellow Brazilian constitutionalists to comment on the above.
Neil Montgomery
Founding Partner and Administrator of Montgomery & Associados
General Member for Brazil at IMGL - International Masters of Gaming Law
