The Federal Supreme Court of Brazil has denied an appeal by the Rio de Janeiro State Lottery (Loterj), upholding federal requirements for geolocation systems in online betting platforms.
The decision, delivered by Minister André Mendonça, reinforces federal jurisdiction over lottery and gambling regulations and requires compliance with laws limiting operations to state territories.
The case stems from Loterj’s challenge to an injunction that invalidated recent changes to its lottery system.
These changes allowed users to self-declare their location without using geolocation technology, a measure the federal government argued undermined the integrity of territorial restrictions established by law.
Loterj claimed that geolocation systems were not explicitly required by legislation and defended its regulatory adjustments as compliant with existing laws.
The Court, however, determined that Loterj’s modifications violated federal laws that mandate that states restrict lottery participation to individuals physically located or domiciled within their territories.
Minister Mendonça explained that geolocation technology, while not explicitly required by the law, is the only effective mechanism to ensure compliance with these territorial limits.
Allowing users to self-declare their location creates a “fiction” of territorial boundaries and undermines federal oversight.
In its decision, the Court reiterated that states are authorized to operate lottery systems only within their geographic and legal boundaries.
It emphasized the federal government’s exclusive authority over multi-jurisdictional gambling operations, preventing states from extending their reach beyond their borders.
The Court also invalidated Loterj’s revised lottery terms and instructed the organisation to reinstate geolocation controls within five days.
Laying down the rules
The ruling is a show of force by the federal government as it asserts its dominant role in regulating gambling activities and highlights the judiciary’s commitment to maintaining jurisdictional clarity.
Minister Mendonça stressed that geolocation technology is critical for ensuring lawful and transparent lottery operations.
He added that failure to enforce these measures risks perpetuating jurisdictional conflicts and undermining the constitutional framework for public services.
This decision has significant implications for state-run lotteries in Brazil. It reaffirms the need for technological solutions to uphold legal boundaries and signals a stricter approach to enforcing federal gambling laws.
The federal government welcomed the ruling as a necessary step to maintain equitable management of lotteries across the country, while Loterj expressed disappointment, citing the financial and operational challenges of implementing geolocation systems.
Shaping the market
Brazil ushered in a new era of regulated online betting on 1 January, with the legal market officially launching under the supervision of the Secretariat of Prizes and Bets (SPA).
This milestone marks a significant step in the country’s efforts to regulate and control its expansive gambling sector while curbing illicit activities.
Regis Dudena, the head of the SPA, expressed optimism about the regulations’ potential to dismantle the black market in Brazil.
Dudena highlighted measures such as blocking IP addresses and Pix transactions, which he believes will render the environment untenable for illegal operators.
In addition to the SPA’s work, a new government agency will help oversee the gambling industry.
On 8 January, the Official Gazette of the Union (DOU) published a joint ordinance outlining the responsibilities of a newly formed task force, the GTI-Bets.
This group is tasked with ensuring compliance and maintaining the integrity of Brazil’s regulated betting sector. Its primary duties include verifying the tax compliance of authorized operators and identifying illegal entities that may be involved in crimes such as money laundering.
The GTI-Bets will also support the development of a compliance program to regularize tax obligations for licensed operators.
Additionally, the group will propose coordinated enforcement actions through the Undersecretary of Inspection (Sufis, for its Portuguese acronym) to crack down on illegal activities and create a dedicated information-sharing channel between relevant agencies.
The task force comprises three representatives appointed by the SPA, Sufis, and the General Coordination of Research and Investigation, the latter two being part of the Federal Revenue.
GTI-Bets will submit bimonthly reports to the overseeing secretariats and a conclusive report at the end of its mandate, ensuring transparency and accountability in its operations.