Luiz Fux vs. Local Lottery Services in Brazil
Supreme Court Justice Luiz Fux has made a significant ruling that could reshape Brazil's gambling and lottery industry. On Wednesday, October 23, Fux suspended a federal regulation that previously restricted certain economic groups from operating lottery services in more than one state. In addition, the decision lifted the ban on advertising these lottery services to residents outside the state where the service is offered.
This ruling is expected to have a considerable impact on the lottery and sports betting markets in Brazil, potentially allowing greater expansion and cross-state operations for major players in the industry.
Fiscal Federalism and State Revenue at the Center
The decision came after the state government of São Paulo requested an injunction. The state's legal team argued that the restrictions imposed by Law 14.790/2023—also known as the Sports Betting Law—could interfere with an upcoming lottery concession auction scheduled for October 28.
Fux emphasized that federal regulations should not place unnecessary obstacles on state finances without reasonable justification, particularly in a country where fiscal federalism allows states to exercise their own revenue-generating powers. “In light of the principle of fiscal federalism, the federal government cannot impose barriers on the full exercise of states' tax and financial powers, especially in the absence of a reasonable justification,” Fux explained in his ruling.
The case had been under review by the Supreme Court since May 2024, with six state governors and the Federal District filing the initial challenge. The case was originally set to be discussed in a virtual session on October 18, but Justice Gilmar Mendes requested more time to review the matter, delaying the process. Given the urgency surrounding the São Paulo lottery auction, Fux took swift action to resolve the issue.
Implications for the Gambling and Lottery Industry
Fux's ruling is seen as a pivotal moment for the gambling and lottery sectors, allowing for broader state-level operations. However, it is important to note that this decision does not directly address the legality of online sports betting in Brazil, which remains a separate issue currently under consideration by the Supreme Court.
The National Confederation of Commerce, Services, and Tourism (CNC) has also raised concerns about Law 14.790/2023, filing a direct unconstitutionality action on September 24. The CNC argues that the law, which permits the promotion of gambling, may disproportionately affect lower-income communities and contribute to increased household debt.
A public hearing on the issue of online betting, known as "bets," is scheduled for November 11, 2024, in the Supreme Court. The hearing will include representatives from the gambling industry, football teams, the Central Bank, and federal government officials, as they debate the broader implications of the law and its potential effects on Brazilian society.
With Fux's decision now in place, the landscape of state lotteries is set to change, but the broader debate over online betting and its social consequences continues.
