Economist Alexandre Manoel and lawyer Roberto Brasil Fernandes analyze the current situation of gambling regulation in Brazil in an article for Jota. The authors point out the “unreasonable” article of Law 14790/2023 that prevents a company from having a sports betting license in more than one entity of the federation. Another misunderstanding comes from cities seeking to create their own lotteries. “The Federal Supreme Court’s decision allowed only states, and not municipalities, to explore these services.”
Lula's third presidential term has been continuing the regulation of reforms carried out since 2016, such as those in the railway and betting sectors, although it is intensifying state intervention in the economy, which creates obstacles to productivity gains. Other difficulties in this regulatory process stem from the lack of more actions by the Executive, as well as the Legislative and Judiciary, to realize the potential growth gains for the country.
In this article, we suggest actions by state Executives and the Judiciary to achieve more effective regulation of the Brazilian betting market, which moves approximately R$ 220 billion (US$ 39.9bn), or 2% of GDP, according to estimates from the Household Budget Survey (IBGE, 2017).Of this amount, sports betting and online gambling account for about R$ 120 billion (US$ 21.2bn), with the Central Bank already tracking half of that. This is not entirely new money; we estimate that about 80% of this amount already existed, being transacted through illegal activities.
The high volume catches the eye and raises suspicions that there is a decrease in revenue of the same magnitude in other sectors due to specific reports of loss of control with betting (cases of gambling addiction). It is necessary to expedite the regulation of this sector, both to increase supervision and to implement responsible gambling, aiming at moderation, as advocated by the Catechism of the Catholic Church (§ 2413).In this regard, two recent legislative understandings have drawn attention for their potential to increase legal uncertainty, rendering the market unviable or preventing companies and honest individuals from participating.
The first setback was sponsored by the federal Executive and approved by the National Congress. It is Article 35-A, § 2°, Law 14.790/2023, which prevents a company from having a sports betting license in more than one state. This understanding is so absurd that we believe it even violates the constitutional clause related to the federative form of state.The second concerns the understanding of some mayors that municipalities can operate lotteries. In this case, there are also honorable exceptions, such as the mayor of Ribeirão Preto (SP), Duarte Nogueira (PSDB), who vetoed the bill that authorized the creation of a municipal lottery service, noting that the Supreme Federal Court (STF) decision only allowed states, not municipalities, to explore these services.
The correct understanding of the mayor of Ribeirão Preto is based on the winning thesis that allowed states and the Federal District to operate lotteries, resulting from actions judged by the STF, guided by the states, based on requests made by the Brazilian Association of State Lotteries (ABLE), author of ADPF 493, and by the state of Rio de Janeiro in ADPF 492. Furthermore, various states of the federation entered as amici curiae.
Defenders of municipal lotteries argue, on the other hand, that it is possible to identify evidence that municipalities were also contemplated based on the votes of some ministers, such as Gilmar Mendes and Alexandre de Moraes. However, it should be noted that such statements were mere obiter dictum.Indeed, the discussion of the aforementioned ADPFs did not even touch on the municipal issue: of the 11 legal opinions attached to the initial ADPF 493, plus the 5 presented in ADPF 492, none addressed the issue of municipalities; none of the amici curiae were municipalities or their representative organizations.
The discussion centered on themes of federalism, equality among federative entities, differentiation between legislative and material competence in the interpretation of Binding Summary 2, and the institute of residual competence pertaining to states and the Federal District, under Art. 25, §1º, of the Brazilian Constitution of 1988.
Moreover, the concept of local interest and the preponderance of this interest, specific to Art. 30 of our Constitution, were not mentioned by any of the procedural actors or the court ministers. In other words, in the decision's dispositive part, the STF did not extend the ruling to municipal entities.
It should also be noted that the STF currently does not adhere to the so-called theory of transcendence of determining reasons, which holds that the binding effects of the decision are related not only to the dispositive part but also to the part of the reasoning that influenced the conclusion of the judgment. In other words, according to STF jurisprudence, nothing not clarified in the dispositive part can be extracted from the judgment of ADPFs 492 and 493.
Additionally, the content of Art. 32 of Decree-Law 204/67 indicates the scope of the norm at the time, restricted only to issues involving state lotteries: “the current situation will be maintained […] state lotteries will not be allowed to be created.”Therefore, there is no STF precedent favorable to the claim of municipalities wishing to establish their own lottery.
Finally, the hermeneutics of the current legal framework teaches that only a complementary law enacted by the National Congress can authorize a state to allow municipalities within its territory to operate lotteries, combining the sole paragraph of Art. 22 of our Constitution with its XX clause.
In light of the above, we warn that state Executives must take a stand (regarding the claims of municipalities wishing to operate lotteries) through the filing of a Direct Action of Unconstitutionality, and the STF must decide, to ensure that the regulation of betting games is effective in the Brazilian market, so as not to take one step forward only to take two steps back.
Alexandre Manoel Chief Economist at AZ Quest and former Secretary in the Ministries of Economy/Finance (2018-2020)
Roberto Brasil Fernandes Lawyer and author of the book “Direito das Loterias no Brasil” (Lottery Law in Brazil)
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