Loterj Legal Battle Reaches Supreme Court

The legal battle between Loterj, Rio de Janeiro’s State Lottery, and the Brazilian government has escalated to the Supreme Court. At the heart of the conflict is Loterj’s push for its licensed operators to offer services nationwide, a move the government is fighting to block. This high-stakes battle comes just months before Brazil’s legal betting market is set to go live, with billions of tax dollars and the future of nationwide gambling regulation on the line.

Loterj Legal Battle Escalates to Supreme Court Over Nationwide Lottery Operations

The Rio de Janeiro State Lottery (Loterj) has taken its fight to the Supreme Federal Court of Brazil, seeking to overturn a ruling that limits its licensees to operations within Rio de Janeiro. The case follows a lawsuit filed by the Attorney-General’s Office (AGU), which challenges Loterj’s authority to extend its lottery operations beyond state borders, asserting that national gambling regulation is the sole jurisdiction of the federal government.

The AGU’s lawsuit, filed on 11 October 2024, has sparked an intense legal battle between the state regulator and the federal government, with significant implications for Brazil’s emerging gambling market. The case centers around Loterj’s insistence that its licensees have the legal right to operate throughout Brazil, citing Loterj Accreditation Notice 01/2023.

Key Points:

1. Loterj Seeks National Jurisdiction: Loterj is seeking a preliminary injunction to allow its licensees to continue operating across Brazil, challenging the federal government’s efforts to restrict its operations to Rio de Janeiro.
2. Government’s Stance on Jurisdiction: The Brazilian government, through the AGU, argues that Loterj is overstepping its jurisdiction and that national regulation falls under the Ministry of Finance’s purview.
3. Potential Impact on Revenue: If Loterj’s licensees are restricted from operating nationwide, the state regulator predicts a significant loss of tax revenue and confusion in the gambling market.

Legal Background and Key Arguments

The legal battle intensified after a Federal Regional Court ruled in favor of the AGU in October, overturning a previous decision that allowed Loterj’s licensees to provide betting services across Brazil. In response, Loterj has requested a preliminary injunction from the Supreme Court to lift this restriction.

The government’s lawsuit asserts that Loterj’s actions are in violation of federal regulations, particularly with respect to anti-money laundering and counter-terrorism financing measures. The AGU has stated that Loterj’s regulations are insufficient and that allowing its licensees to operate nationwide would undermine the Union’s jurisdiction over gambling regulation. The AGU argues that Loterj’s actions “disobey the rules of the Ministry of Finance” and open the door to potential illegal activities.

Loterj, however, claims the federal government has created an environment conducive to illicit gambling practices by delaying the launch of legal betting regulations. The regulator maintains that its licensees are operating legally and that their rights are protected under Article 35-A of gambling regulations Law No 14,790, which mandates adherence to law over ministerial ordinances or injunctions.

The Stakes for the Gambling Market

Brazil’s legal betting market is set to go live on 1 January 2025, and this case could have far-reaching consequences for operators looking to enter the market. Loterj argues that the federal government’s decision to block its nationwide operations would result in lost tax revenues and reduced oversight, leaving the market vulnerable to black-market operators.

Loterj also expressed concerns about the government’s handling of the situation, particularly the Secretariat of Prizes and Bets’ (SPA) recent publication of a list of approved operators. Loterj criticized the SPA for allowing some operators to continue business without full authorisation, accusing the government of facilitating money laundering risks by not thoroughly vetting these companies.

The conflict also touches on the controversial presence of Esportes da Sorte, a betting operator that was denied federal approval due to its involvement in a money laundering investigation. Loterj highlighted the fact that Esportes da Sorte’s parent company had acquired a majority stake in ST Soft, a Loterj-licensed operator, allowing it to operate legally at least in Rio de Janeiro despite being flagged by the government.

What Comes Next?

As the Supreme Court weighs the merits of both sides, the outcome of this case will set an important precedent for the future of gambling regulation in Brazil. If the court rules in favor of the federal government, it could tighten the government’s control over the gaming market, limiting the ability of state regulators like Loterj to extend their reach. On the other hand, a ruling in favor of Loterj could expand the rights of state-regulated operators to compete on a national scale.

The stakes are particularly high given the imminent launch of Brazil’s legal betting market. Should Loterj’s request for an injunction be granted, the state’s licensees may continue operating nationwide, reshaping the landscape of the Brazilian gambling industry.

The ongoing legal battle between Loterj and the Brazilian government has reached the Supreme Court, with both sides fighting over the right to regulate gambling on a national scale. As the court deliberates, the outcome could determine whether state-licensed operators can extend their services nationwide or if the federal government will maintain control over the rapidly growing gambling market. The decision will have significant implications for Brazil’s legal betting landscape, tax revenues, and the oversight of gambling operations.