Study estimates municipal betting could generate $2 billion in Brazil’s annual federal revenue
The study, which was commissioned by the National Association of Municipal and State Lotteries (Analome), assessed the economic influence of municipal betting, amid ongoing discourse in Brazil over its constitutionality.
In March, Brazil’s Solidarity party filed a Claim of Non-Compliance with a Fundamental Precept, calling for municipal lotteries to be suspended over claims they were disrupting the newly regulated federal online betting market.
However, the Supreme Federal Court (STF) Minister Nunes Marques denied that suspension, with municipal lotteries allowed to continue operations until the STF makes a final ruling.
In response, the Leme Consultores study has revealed municipal lotteries could contribute significantly to the Brazilian economy, to the tune of nearly BRL12 billion in federal revenue for the government.
Smaller operators unable to meet federal requirements in Brazil
The study, based on existing data for companies which have obtained licences in the municipality of Bodó in the state of Rio Grande do Norte, found around BRL8 billion could come from smaller companies that can’t meet the high barriers of entry for federal authorisation.
Companies seeking a federal licence must pay a hefty BRL30 million authorisation fee, while also meeting significant technical and certification requirements.
“These barriers to entry – especially for small and medium-sized agents – not only affect competition, but also directly reduce the potential for tax collection,” the study said.
“In particular, the high initial and maintenance costs required by federal legislation may significantly restrict the number of operators able to collect taxes, reducing the effectiveness of the tax system on the sector as a whole.”
Are municipal lotteries legitimate?
The Solidarity party claims municipal lotteries are creating a “truly chaotic scenario” in Brazil, with jurisdictions navigating around federal betting laws to allow companies without nationwide authorisation to operate.
The study disputes that, however, saying municipal lotteries “may represent a legitimate way” of decentralising lottery, encouraging competition.
“Decentralised lottery models, such as those in the United States, Canada and Australia, show that the coexistence of local and national lotteries can bring beneficial results in terms of the distribution of powers and tax collection,” the study explained.
“In Brazil, the excessive centralisation of lottery activity in the Union resulted in a limited supply of products and the concentration of revenues in a few hands, making it difficult for many regions to access the benefits generated by the activity.”
However, Daniel Romanowski, president of the state lottery in Paraná, believes municipal lotteries could pose a problem to smaller companies that can’t gain federal authorisation.
“We have 5,000 cities in Brazil for sure,” Romanowski told iGB. “There are some cities, like my city Curitiba, São Paulo, they have the big structure, but also in the same level we have cities with 3,000 people.
“Checking out the websites, the systems, the games, everything that goes on, to have good suppliers for 3,000 people, I don’t know if they will have the qualities that we want for the market.”