Rio De Janeiro, Paraná Begin Brazilian Betting Conflict

March 22, 2024
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Jurisdictional conflicts between Brazilian states and the federal government over online betting licensing have escalated, after Paraná asked a judge to join a case to prevent local licensees in the state of Rio de Janeiro from operating throughout the country.
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Jurisdictional conflicts between Brazilian states and the federal government over online betting licensing have escalated, after Paraná asked a judge to join a case to prevent local licensees in the state of Rio de Janeiro from operating throughout the country.

The southern Brazilian state of Paraná, which counts some 11m people as its citizens, insists that Rio de Janeiro is overstepping its bounds and violating federal law by allowing locally licensed operators to accept bets throughout Brazil, including from within Paraná.  

This is not a new battleground, with Rio and Paraná both rushing to take advantage of the vacuum left by the federal government's slow legislative pace in regulating online betting.

The pair are two of three Brazilian states to have awarded local licenses for operators to offer land-based and online fixed-odds betting.

Rio de Janeiro’s state lottery body LOTERJ is the first and only, however, to openly grant licences that allow companies to operate online betting outside its own geographical boundaries. 

Under the terms of a state licensing process, LOTERJ does not require operators to block access to players from outside Rio, but instead players must legally acknowledge that “the placing of online bets will always be considered to occur in the territory of the state of Rio de Janeiro, for all intents and purposes including fiscal and legal, regardless of the geolocation of the IP or device from which the bet originated”.

LOTERJ has found itself on the receiving end of a civil lawsuit since November as a result of its regime. 

Last week, Paraná filed a motion to join the case, which is also being observed by Brazil's federal attorney general's office.

In a statement confirming the legal challenge, Paraná state lottery Lottopar noted that provisions of Brazil's new federal Law 14.790 governing online betting and gaming requires the state to restrict the operation and advertising of state-regulated lottery activities exclusively to players physically located within their borders.

“It is possible to say that LOTERJ created, through a mere notice, a legal fiction of territoriality; that is, the bettor can place the bet in any part of Brazil and it will always be considered in the territory of the State of Rio de Janeiro,” Lottopar said.

LOTERJ’s tender to offer online and fixed-odds sports betting was first announced in April of 2023, with licences costing R$5m a pop — a sixth of the price of a federal licence. 

LOTERJ has so far issued a total of four licences but is reviewing applications from three other operators, including 1xbet, and has also recently met with a local operator that has the branding rights for Caesars Sportsbook in Brazil.

The lottery authority reopened its licensing process earlier this month after adopting a decree making changes to the terms of its licensing process, including acknowledging the possibility of operators offering casino-style games as defined by Law 14.790. However, LOTERJ did not change its rules to require players to be physically located in Rio as per the new legislation.

According to Rafael Marchetti Marcondes, the legal director of Brazilian betting industry association IBJR: “This judicial dispute was something predictable; the position adopted by Rio de Janeiro calls into question the existence of the federal lotteries model.

“In my opinion, it doesn’t make sense being licensed locally with the right to operate nationally. By doing this, Rio de Janeiro disrespects the jurisdiction of other state lotteries and also the federal one. The position adopted by Rio de Janeiro is completely groundless.”

Although Lottopar held its own licence tender process last year for sports betting, the lottery requires approved operators to block players from outside the state and made clear in a statement in February that it is eager to operate in accordance with federal laws.

The statement was made in response to the first in an ongoing series of prominent Brazilian newspaper articles to highlight the issue of state-level competition to the new federal framework set by Law 14.790.

“We understand that there will be companies interested and with an appetite for the state and national markets. And that these will be able to compete and coexist in a harmonious way,” Lottopar wrote.  

“We are not opponents of the [federal government]; on the contrary, we really hope that the market is regulated as quickly as possible, thus seeking greater legal security for the entire lottery market, more security for bettors and with a social return for the entire population.”

Additional reporting by James Kilsby.

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