São Paulo’s government has awarded a $100m concession for a state lottery and may soon follow up with a local licensing system for sports betting and online gaming.
In a further sign of Brazil’s gambling market continuing to develop at both state and federal level, a Portuguese-Brazilian consortium was named Friday (November 1) as the winning bidder of a 15-year exclusive concession to operate a range of lottery games across São Paulo, by far Brazil’s most populous and wealthiest state.
Through an auction process, the Aposta Vencedora consortium ultimately offered R$600m (US$100m) as an upfront concession fee, at a 130 percent premium to the minimum acceptable bid of R$260m.
That was good enough to beat off competition from IGT-led consortium SP Loterias, which was the only other qualified bidder to step forward at an earlier stage of the concession process last week.
A law to establish a state lottery was approved by the São Paulo legislature in 2021, following the landmark 2020 Federal Supreme Court ruling which clarified that state and potentially municipal governments have the same constitutional authority to operate and regulate lottery games within their own borders as Brazil’s federal government does at a national level.
Under its concession contract, the Aposta Vencedora consortium will responsible for implementing, marketing and operating a range of traditional lottery games, including draw-based games and instant lotteries.
The group is expected to develop a retail network comprising 31 dedicated lottery outlets, as well as 11,000 points of sale in established locations. Lottery games will also be offered through digital channels within São Paulo.
The lottery operator will pay the state 35 percent of gross operating revenue plus additional amounts based on performance and to cover the cost of regulatory oversight, in addition to the upfront concession fee.
“The state of São Paulo has a regulatory model that allows us to implement a world-class lottery here, like in the United States,” said Alexandre Manoel, a former federal lottery official in Brazil and the chair of Aposta Vencedora’s board.
The state lottery concession does not cover fixed-odds betting on sports or casino-style games that are also recognised as approved lottery games under Brazilian federal law.
The respected Gazeta do Povo newspaper reported in September that the São Paulo government led by Governor Tarcísio de Freitas instead intends to establish a competitive licensing system for sports betting and online gaming, once the lottery concession process has been completed.
São Paulo is unquestionably the most lucrative state-level market for lottery or betting games in Brazil given its population of more than 44m, and São Paulo now joins the series of states that have capitalised on the 2020 Supreme Court ruling through a range of different regulatory models.
Rather than issuing an exclusive concession to one provider as in São Paulo, other Brazilian states including Rio de Janeiro, Paraná and Maranhão have instead elected to authorise multiple operators for specific lottery games.
Meanwhile, the municipality of São Paulo, which is home to more than 12m people, also has passed a law to establish a potentially competing city-wide lottery. The municipal government began a consultation process earlier this year to define the appropriate operating models for different lottery products.
Friday’s auction process was held one week after the state government of São Paulo scored an important legal victory to invalidate new federal restrictions applied to state lotteries via the December 2023 law that also established Brazil’s national licensing system for fixed-odds sports betting and online gaming.
São Paulo and six other states filed a lawsuit earlier this year contending that one provision of the law banning state-authorised operators from obtaining a licence or concession from more than one state was unconstitutional.
The states also challenged a separate restriction in the law that would explicitly prohibit state-authorised lotteries from advertising beyond that state’s borders.
In an October 23 ruling, Supreme Court Justice Luiz Fux agreed to impose a preliminary injunction on those two legal restrictions, noting that the advertising prohibitions were impractical and that Brazil’s constitution forbids the federal government from passing laws to benefit itself over its member states.
Fux wrote that the “imminent nature” of São Paulo’s lottery concession process was a “a sufficient reason for granting the preliminary injunction in this present moment”.
“If these seemingly unconstitutional restrictions are maintained, the universe of companies interested in those services would likely be smaller and therefore so would the potential revenue to be gained by the state,” the judge wrote.