Loterj Appeals Supreme Court Preliminary Injunction, Predicts Losses

The beginning of the year marked the launch of Brazil’s new regulatory framework, governing online sports betting across the country in what is expected to become an important global market. Despite the changes, which are expected to positively impact the sector, a long-standing dispute is once again gaining speed.

Preliminary Injunction Seeks to Restrict Loterj-Licensed Operators

That is the case with the State Lottery of Rio de Janeiro, Loterj, which took an issue with the new federal regulatory framework on online gambling in Brazil. Last week, Supreme Court Justice André Mendonça granted a preliminary injunction against the State Lottery of Rio de Janeiro, in a move that is expected to prevent Loterj-licensed operators from offering betting and lottery services outside Rio de Janeiro.

Justice Mendonça’s preliminary injunction was based on Brazil’s new online gambling framework and marks a landmark moment in a long-term dispute over the matter. However, the Supreme Court’s recent judgement immediately captured the attention of Loterj. As a result, the State Lottery filed an appeal with the Federal Supreme Court (STF), claiming that the ruling may negatively impact state revenues and operators. Loterj claimed that the ruling had “omissions, ambiguities, and material errors” when it comes to the restrictions applicable to state-licensed operators, as announced by SBC News.

There’s a significant difference between the costs and taxes applicable to federal and state licenses. An operator licensed by Loterj would be subject to a 5% tax on gross gaming revenue (GGR) and must pay a BRL 5 million ($818,500) license fee. In contrast, federal-level licenses must comply with a stricter regulatory framework, pay a 12% tax on GGR, and a significantly higher license fee, BRL 30 million ($4.9 million).

Loterj Claimed Millions of Dollars Are at Risk

The preliminary injunction by Justice Mendonça required Loterj-licensed operators to implement restrictions through geolocation technology. This would enable the operators to only provide their services to customers physically located in Rio de Janeiro.

Following the ruling, Loterj was given five days to confirm that all of its licensees complied with that measure. However, the State Lottery questioned how reasonable this preliminary injunction is in the context of the lengthy dispute and the millions of dollars at risk. “It is respectfully requested that, in any scenario, the ordered measures be modulated to, at this initial stage, at least preserve the perfected legal acts, understood as the Accreditation Terms already signed as a result of regularly concluded bidding processes up to the date of the measure’s issuance, at least until the final judgment of the case,” the appeal filed by Loterj reads.

Importantly, some of the Loterj-licensed operators are currently sponsors of important soccer teams, including some in Serie A Brasileiro. The State Lottery’s appeal also argued that considering the significant potential harm of the preliminary injunction, the ruling had no valid reason to intervene. The matter is likely going to be heard during a plenary session by the Federal Supreme Court next month. It is unclear whether or not the upcoming hearing will settle the long-term dispute.