Brazil’s Supreme Court Halts Municipal Lotteries Amid Regulatory Concerns

Brazil’s Federal Supreme Court has placed all municipal lotteries across the country on immediate hold, casting significant uncertainty over their future.

The precautionary suspension follows a filing from the Solidarity Party, which argued that these locally run lotteries were violating national betting regulations.

The decision, issued on Wednesday by Minister Nunes Marques, freezes every municipal law and decree that establishes, authorises, or governs lottery and sports-betting operations. His ruling stems from a Claim of Non-Compliance with a Fundamental Precept (ADPF) submitted by the Solidarity Party, asserting that municipal lotteries had created a “truly chaotic scenario” in which operators disregarded federal betting rules.

Marques emphasised that municipalities do not have the constitutional authority to legislate on gambling, a matter he stressed falls outside the scope of “local interest.” According to him, the proliferation of local lotteries had resulted in a “drastic weakening” of federal oversight of gambling activities in Brazil.

The minister’s injunction also imposes heavy fines: BRL500,000 (US$94,065) per day for municipalities and companies that continue offering lottery or betting services, and an additional BRL50,000 daily fine for mayors and company presidents who persist in running these activities.

The Attorney General’s Office backed the ADPF, arguing that the existence of municipal lotteries jeopardised consumer protection and undermined the federal government’s regulatory authority. Marques’ ruling will next be presented for confirmation in an extraordinary plenary session, where the suspension of municipal lotteries will be put to a referendum.

The injunction affects every municipal regulation, procurement process, contract, and operational activity related to these lotteries. State-run lotteries remain untouched, shielded by Article 35-A of Law No. 14,790/2023, which reserves lottery administration exclusively for “states and the federal district,” thereby excluding municipalities from participating.

The Solidarity Party had warned that, without swift intervention, more than 5,500 municipalities could attempt to establish their own lotteries. One example already under scrutiny was the small municipality of Bodó, home to just over 2,000 residents. Bodó drew national attention after issuing multiple operator licences for only BRL5,000 each—far below the BRL30 million required for a federal licence. In October, following a warning from the Secretariat of Prizes and Bets (SPA), the country’s federal betting regulator, the mayor of Bodó suspended the town’s lottery operations.

Marques reiterated that municipalities’ “local interest” responsibilities revolve around essential needs such as transport and urban planning—not the operation of lotteries. While municipal authorities claimed that managing local lottery services could bolster tax revenue for public services, the preliminary ruling suggests those arguments are unlikely to prevail if the suspension becomes permanent.

“This situation, it seems to me worthy of the attention of this Supreme Federal Court, presents an urgent scenario capable of causing not only the deepening of the alleged unconstitutionality, but also the aggravation of the scenario of legal uncertainty, considering the dissemination of institutional practice in the municipalities, the multiplicity of challenges and the potential flexibility in the control and supervision of ongoing activities,” Marques wrote in his decision.

The Supreme Court has directed the SPA, the National Association of Games and Lotteries, and the National Telecommunications Agency to take all necessary steps in response to the ruling.

By fLEXI tEAM