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Brazil’s chief gambling regulator has urged the country’s Supreme Court to reject a constitutional challenge that threatens to derail implementation of a 2023 federal law on online betting at the 11th hour.
The Federal Supreme Court (STF) began a two-day public hearing on Brazil’s online betting market on Monday (November 11), as the court prepares to hear a pair of overlapping legal challenges filed in September by the National Commerce Confederation (CNC) that represents Brazilian retail businesses and by the Solidarity political party.
This week’s public hearing is not intended to examine the two plaintiffs’ legal arguments — that a December 2023 federal law to regulate sports betting and online gaming violates constitutional principles of economic order, public health and free competition.
Instead, Justice Luiz Fux, the rapporteur and presiding judge in the cases, said it would educate justices on the online betting industry and provide the factual context to “subsidise” an eventual ruling.
One central theme of Monday’s proceedings was how an initial federal law that was enacted in 2018 but never implemented fostered the rapid growth of an offshore market without any controls.
As enacted last December, Law 14.790 made various amendments to that original 2018 law and set the wheels in motion for a national licensing and regulatory system that is set to be fully launched on January 1, 2025.
Régis Dudena, head of the Secretary for Prizes and Bets (SPA) within Brazil’s Ministry of Finance, told Fux that the best way to mitigate legitimate social concerns related to online gambling was to allow both the new federal law and the SPA’s series of implementing regulations to take full effect.
“Demand for these services is real, and a potential declaration that the law is unconstitutional will merely direct Brazilians to an unsafe, illegal market that has harmful effects such as fraud, money laundering and exploitation of bettors,” Dudena warned.
The Ministry of Finance has determined that the most appropriate role for the federal government regarding online betting is to regulate the industry, according to Dudena.
“And it is only possible for this role to be complete, effective and efficient if the constitutionality of Law 14.790 is recognised by this court.”
Similar arguments were made on Monday by representatives of Brazil’s Ministry for Sport, the Brazilian Association of Radio and Television Broadcasters, the state lotteries of Rio de Janeiro and Paraná, and several gambling industry trade bodies.
Still, the CNC and Solidarity Party were far from alone in raising alarm over the status of Brazil’s online gambling market.
Brazil’s human rights minister, Macaé Evaristo, said Law 14.790 was causing harm to Brazilian families and violated constitutional protections of human rights and personal dignity.
Officials from the Brazilian federal government’s ministries for health and social development expressed concerns that the country was not prepared for an anticipated spike in mental health treatments for gambling addiction, while a representative for the Brazilian Psychiatric Association said the existing legislation was inadequate and called for an immediate ban on all gambling advertising.
Two officials from the office of Brazil’s Prosecutor General (PGR) did not directly address recent reports that the authority was preparing to file its own constitutional challenge against Law 14.790.
But Luiz August Santos Lima, deputy prosecutor general, said the PGR was closely examining an industry that had become a “big dragon” in Brazil. He also raised the possibility of authorities imposing “precautionary measures” to impose similar restrictions on betting advertising as those applied to tobacco.
Brazil Attorney General Jorge Messias described recent studies indicating elevated spending on gambling by poorer Brazilians as “very worrying”.
However, the attorney general noted that the new regulatory regime was still being implemented and called for it to be closely monitored on an ongoing basis over a “reasonable period of time”, to evaluate whether it was actually having any unconstitutional effects.
In that event, Messias said, the government should take “firm and decisive actions” to correct the legislation. The attorney general also warned that betting operators themselves would need to “adapt in both form and content” to avoid committing unconstitutional practices.
Injunction, Senate Investigation Among Industry Threats
The STF hearing will continue today (November 12) with further testimony due to be provided by academics and representatives of leading Brazilian football clubs, among others.
The court has yet to schedule oral arguments on the legal merits of the cases, but the first matter to be decided is whether implementation of Law 14.790 should be put on hold as an interim step.
Fux told reporters during a break in Monday’s hearing that the STF would not be able to rule on the case until the first half of 2025 but he planned to speak with fellow justices about whether they should impose a preliminary injunction on the law.
“The problems highlighted here related to poorer communities, mental-health problems and other serious problems lead us to the idea that this judgment must be made urgently,” Fux said.
The STF hearing comes just as the SPA is preparing to move into the next phase of its licensing process, with a first batch of operators due to learn by the start of next week whether their applications are successful.
Approved applicants would then have a period of 30 days to pay an upfront fee of R$30m (US$5.3m) and submit various additional documents in order to be eligible to go live on the scheduled first day of Brazil’s fully regulated market at the beginning of January.
As previously highlighted by Vixio GamblingCompliance, the Supreme Court is not the only front where Brazil’s online betting industry is coming under fire ahead of the planned launch of the regulated market.
Brazil’s Senate is scheduled later today (November 12) to formally establish a special investigatory commission, or CPI, to evaluate online gambling and its impact on Brazilian families and risks of money laundering.
Senators will vote to confirm a chairman and rapporteur for the CPI, which will then have a period of 130 days to conduct hearings and produce recommendations that may include stricter regulations for the industry.
Last month, President Lula da Silva also instructed different government ministries to work together to review whether rules should be tightened.
Lula told one federal senator on Sunday that he supported his proposal to ban any bets on yellow or red cards, corners or other outcomes not tied to the outcome of a game.
