Rio Lottery Chief Warns: Illegal Market Could Grow to Incalculable Proportions

The gambling landscape in Brazil is facing a period of intense turmoil following the implementation of new federal restrictions that have stripped states of their ability to license fixed-odds betting. Fabíola Esteves, the president of Rio de Janeiro’s state lottery (Loterj), recently expressed grave concerns regarding the future of the industry. Provisional Measure (MP) 1.394, which came into force on September 25, has effectively ended state-authorized betting operations, a sector where Loterj had been a leading force since 2023. This change not only impacts the market but also threatens the funding for numerous social initiatives within the state.

Esteves, who took the helm at Loterj in March 2026, emphasized the social responsibility of the institution. She argued that the ban does more than just stop business operations; it drives consumers toward underground platforms. When players leave the regulated environment, the state loses its ability to monitor financial transactions and ensure player safety. The concern is that this migration to illegal markets could escalate to proportions that are difficult to quantify, leaving vulnerable populations without the protection of a legal framework.

Numbers and facts

The financial impact of the betting ban is significant for Rio’s social infrastructure. Loterj’s revenue traditionally supports day-care centers in Vila João, Jardim Batan, and Cidade de Deus, as well as shelters for victims of domestic violence. Recently, Loterj announced a call for social subsidy programs, offering up to R$2.5m (€410,000) for projects focused on digital inclusion and educational support for teenagers aged 12 to 18. These funds are now at risk if the lottery cannot find stable revenue streams to replace the lost betting fees.

Amidst the ban on sports betting, Video Lottery Terminals (VLTs) remain a point of contention. Authorized under state Decree 49.804/2025, these terminals are classified as instant lottery products. Despite criticism that they mirror prohibited online casino games, Esteves maintains that VLTs are strictly regulated tools for selling lottery products. They must adhere to rigorous standards for user identification, anti-money laundering, and security. With the congressional vote on the MP extended until March and a final resolution likely delayed until 2027, the status of these products remains a crucial part of Loterj's strategy.

Background

The legal battle over state lotteries in Brazil dates back to a 2020 Supreme Court (STF) ruling that allowed states to operate their own lotteries. Loterj was the most proactive state body, even allowing nationwide access until court rulings restricted operations to Rio’s territory.

"The migration of users to unauthorized platforms is undoubtedly an issue that could escalate to incalculable proportions. When an activity leaves the regulated environment and goes underground, the main loser is the consumer." - Fabíola Esteves, President of Loterj

In September, Loterj also terminated its contract with a major payment provider following an administrative review. The focus remains on ensuring that any future services provide high levels of security and transparency, utilizing Brazil’s Pix system for all transactions to ensure financial traceability. Esteves stresses that international models, like that of the UK, are valuable references but must be adapted to Brazil's federal structure to be effective.

Why it matters for German players

For players in Germany, the situation in Brazil serves as a stark reminder of the importance of a stable regulatory environment. The German Interstate Treaty on Gambling 2021 (GlüStV 2021) provides a level of certainty through the GGL-whitelist that is currently missing in Rio. In Germany, players are protected by mandatory limits, such as the €1,000 monthly deposit limit and the €1 per spin stake limit on slots. While Brazil faces a surge in black market activity due to sudden bans, the German system aims to channel players into a safe, regulated market. Playing at a GGL-licensed casino ensures that players do not fall victim to the lack of oversight seen in unauthorized jurisdictions.

What it means for GGL-licensed casinos

Operators with a German license must understand that regulatory consistency is the bedrock of a successful market. The turmoil at Loterj demonstrates how quickly a market can destabilize when federal and state authorities clash. For GGL-licensed casinos, maintaining compliance with systems like LUGAS and OASIS is not just a legal requirement but a competitive advantage. It builds trust with consumers who, as seen in Brazil, may otherwise flee to illegal offshore sites when legal options become restricted or uncertain. The Brazilian crisis highlights the necessity for clear, enforceable rules that prioritize consumer safety over short-term political shifts.