Municipal Betting Could Generate Billions for Brazil, Study Finds

A new study by Leme Consultores estimates that municipal betting could generate an annual revenue of R$ 11.6 billion (US$ 2 billion) at the federal level for the Brazilian government.

The study, commissioned by the National Association of Municipal and State Lotteries (Analome), assessed the economic influence of municipal betting, amid ongoing discussions in Brazil about its constitutionality.

In March, the Solidariedade party filed a Claim of Non-Compliance with Fundamental Precept (ADPF) requesting the suspension of municipal lotteries, arguing that they were harming the newly regulated federal online betting market.

However, Supreme Federal Court Minister Nunes Marques rejected the suspension, allowing municipal lotteries to continue operating until the STF issues a final decision.

The Leme Consultores study revealed that municipal lotteries can significantly contribute to the Brazilian economy, generating nearly R$ 12 billion in revenue at the federal level.

Smaller Operators Unable to Meet Federal Requirements in Brazil

The study, based on data from companies licensed in the municipality of Bodó, in the state of Rio Grande do Norte, found that approximately R$ 8 billion could come from smaller companies unable to meet the high barriers to entry for federal authorization.

Companies applying for a federal license must pay an authorization fee of R$ 30 million, in addition to meeting significant technical and certification criteria.

“These barriers to entry – especially for small and medium-sized agents – affect competition and 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 capable of collecting taxes, reducing the effectiveness of the tax system in the sector.”

Are Municipal Lotteries Legal?

Solidariedade claims that municipal lotteries are creating a “truly chaotic scenario” in Brazil. According to the party, municipalities are circumventing federal betting laws and authorizing the operation of companies without national authorization.

However, the study contests this claim, stating that municipal lotteries “may represent a lawful way” to decentralize lotteries, encouraging competition.

“Decentralized 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 power distribution and tax collection,” the study explained.

“In Brazil, the excessive centralization of lottery activity in the Union has resulted in a limited supply of products and the concentration of revenues in few hands, making it difficult for many regions to access the benefits generated by the activity.”

However, Daniel Romanowski, president of the state lottery of Paraná, believes that municipal lotteries may pose a problem for smaller companies unable to obtain federal authorization.

“We have 5,000 cities in Brazil, for sure,” said Romanowski. “There are some cities, like my Curitiba, as well as São Paulo, that have the great structure, but also at the same level we have cities with 3,000 people.

Checking the websites, the systems, the games, everything that happens, to have good suppliers for 3,000 people, I don’t know if they will have the qualities that we want for the market.”