Brazil’s Attorney General’s Office (AGU) filed a lawsuit with the Federal Supreme Court on Friday (11 October) aiming to prevent the Rio de Janeiro State Lottery (Loterj) from licensing sports betting operators nationwide.
The attorney general has asked the court to grant a preliminary injunction that would order a halt to local licensees operating outside of Rio de Janeiro State, as well as making the use of geolocation systems mandatory.
It follows a Federal Regional Court decision earlier in the month, which overturned a previous ruling allowing for the state lottery to licence operators to offer gaming nationally.
Despite this, the government argued the state lottery’s lax geolocation frameworks mean that operators are able to continue working on a national level.
A Prizes and Betting Secretariat technical note attached to the complaint argued that parallel licensing powers would undermine the entire gambling regulatory framework.
The note said: “Indeed, if this territoriality parameter of Rio de Janeiro were considered valid throughout Brazil, the states would compete to attract fixed-odds betting operators to their jurisdictions and would be induced to weaken their regulatory standards and progressively deteriorate their legal institutions, impacting cybersecurity, responsible gaming, the financial health of operators and the fight against money laundering.”
In the document, the AGU highlighted that current Loterj licensing rules still do not restrict online betting to Rio de Janeiro.
The office added that Loterj currently has lax anti-money laundering and counter terrorist financing rules.
AGU says Loterj lacks geolocation capacities
While Loterj has a system in which bettors declare wagers will be made in the state, the AGU said it lacks a geolocation system to ensure this is the case.
This, the complaint said, also means the regulatory system would be unable to block bets originating from other regions.
As such, the complaint argued that in practice Loterj licences allow companies to operate nationwide, which is harmful for both the federal system and competition.
The AGU added: “Furthermore, operating nationwide violates the rules of the Ministry of Finance and invades the jurisdiction of the Union by operating lottery services throughout the national territory.”
Brazil’s finance regulator, the Financial Activities Control Council, also attached a technical note to the complaint which argued Loterj’s current rules have caused severe damage to the money laundering prevention system.
The lawsuit is the latest news in the increasingly acrimonious jurisdictional dispute between the national government and state lottery.
Loterj issues betting licences
The state lottery opted to grant controversial betting operator Esportes da Sorte a licence this month despite the company’s CEO being implicated in a government money laundering crackdown.
Esportes da Sorte denies any and all wrongdoing related to the matter.
After the previous regional court decision, Loterj issued a notice that stated the decision would not affect any of its licensees until the 1 January launch of the regulated market.
Loterj said: “It is important to note that for every real collected by the State of Rio de Janeiro through legalised betting operations, the Federal Government receives eight times more in taxes.
“Finally, unlike the Federal Government, Loterj immediately applies control restrictions, while the Federal Government has been allowing betting operations by companies based in tax havens, without any criteria or control.”