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The São Paulo municipality of Poá has opened a video lottery facility, the first of its kind in Brazil since a landmark Supreme Court ruling allowing states and cities to conduct a wide range of lottery activities.
The lottery parlour is being operated on behalf of the municipality by the Rio de Janeiro-based company AMZ Loterias do Brasil, which was granted a local concession to operate any lottery games recognised under a 2018 federal law.
The facility, which opened on Tuesday (March 26), features a total of 42 electronic terminals offering a range of instant lottery games.
The content is provided by PlayAGS Brasil and uses several themes that are similar to those commonly found on slot machines or video lottery terminals (VLTs) in Brazil.
The move by Poá is the latest in a series of events this month that have highlighted the tacit war between Brazil's federal government and its states and municipalities over the rights of the latter to operate lottery games, including sports betting and online gaming, as well as instant products.
While the federal journey to introduce a national licensing system for fixed-odds betting has taken seemingly endless twists and turns, Brazilian states, and now local authorities, have seized the opportunity to fill the regulatory gaps.
In September 2020, the Supreme Federal Court ruled that although Brazil's federal government had exclusive authority to operate or regulate approved lottery activities on a national basis, state and municipal governments could not be prevented from doing the same within their own jurisdictions.
Last week, the state of Rio de Janeiro was informed by Brazil's Ministry of Finance that it had overstepped the mark by issuing licences for online sports betting that allow operators to accept wagers from across the country via servers located within the state.
The state of Paraná, which also has issued local licences for sports betting, has joined a separate legal case against Rio.
Now Poá is testing the limits of municipalities in regulating and operating lottery games, with the prospect of further retail outlets offering lottery gaming terminals spreading in further cities across the country based on the 2020 Supreme Court ruling.
Brazilian lawyer and gambling expert Luiz Felipe Maia told Vixio GamblingCompliance that it is not entirely clear legally whether municipalities can have their own lotteries or if that is only a power afforded to Brazil’s 26 states.
The Ministry of Finance has taken the view that only states have authority to introduce lotteries, and not Brazil's near 6,000 municipalities, according to a recent report in the Folha de S. Paulo newspaper.
“Some legal scholars and lawyers say that only the states can have a lottery because, according to the Brazilian Constitution, the states have what is called residual competence. “So for everything that is not expressly stated in the Constitution as the competence of the federal union, municipalities or the states, the residual competence goes to the states. So since it's not in the Constitution, the residual competence would be only for the states,” Maia explained.
“The municipalities, on the other hand, argue that we're not talking about competence here. We're talking about an economic activity that can be developed by any of the federative entities, either the union, the municipalities, or the states,” he said.
In line with the 2020 Supreme Court ruling, states are allowed to legislate on any operational aspects of lottery modalities that are recognised by the federal government. The municipality of Poá is arguing that its virtual lottery terminals are an operational aspect of instant lottery games, which are recognised as a lawful lottery modality under federal law.
Other Brazilian municipalities that have also passed local laws to introduce lotteries include the much larger cities of Belo Horizonte and Porto Alegre, among others.
Additional reporting by James Kilsby.
