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In an anticipated but alarming move, Brazil’s prosecutor general has filed a constitutional challenge with the Brazilian Supreme Court to overturn two federal laws which regulate online betting. 

It was first reported last week that Prosecutor General of the Republic Paulo Gonet would file a so-called action of direct unconstitutionality (ADI) to overturn the December 2023 Law 14.790, which is in the process of being implemented.

The ADI, filed late on Monday (November 11), challenges both Law 14.790 and Articles 29 to 35 of underlying lottery Law 13.756 from 2018, calling the two laws “insufficient to protect fundamental rights of consumers of products and the national economy”.

The latest legal challenge comes as Supreme Court justices are already determining whether to impose an injunction on Law 14.790 based on two earlier actions filed by a major Brazilian workers union and the Solidarity political party.

But Gonet’s constitutional challenge may be even more concerning for Brazil’s betting industry as it takes both a broader aim at federal laws and regulations related to sports betting and online gaming, and comes from a more powerful plaintiff.

One expert observer told 91����ԭ�� GamblingCompliance that Gonet’s legal challenge was a “serious threat”, while another described it as “a very worrying sign” for a Brazilian market that stands on the cusp of regulation.

Gonet, in the of the submitted ADI, cites the laws’ “lack of protection to fundamental rights” and argues that the legislation “also deviates from constitutional restrictions on advertising of products that pose a high risk to health”.

In a damning passage, Gonet wrote that “the entire system of norms on the lottery offering of fixed-odd betting violates the Constitution”.

He compared the ADI to an earlier successful legal challenge that suspended an unrelated federal law allowed for the sharing of a registry of telephone users with the Brazilian Institute of Geography and Statistics.

The prosecutor general called for both the 2023 law and relevant articles of the 2018 legislation to be declared unconstitutional, and called for a preliminary injunction that would suspend the laws immediately and make all fixed-odds betting illegal in Brazil.

The legal filing was made at the midway point of a two-day public hearing by the Federal Supreme Court designed to educate justices on the online betting industry before they can issue a ruling on the pending court cases brought by the National Confederation of Commerce (CNC) and by Solidarity.

Speaking to reporters after the conclusion of the hearing, the justice appointed to the role of rapporteur and presiding judge for all three constitutional challenges downplayed the significance of the third legal case filed by Gonet’s office.

Justice Luiz Fux said the prosecutor general's lawsuit was “another related action” that made “some additional arguments”, but still focused on the same core issue of regulation.

Fux said that the court’s two-day informational hearing had underlined how online betting cannot be allowed to continue in Brazil without adequate regulation, but equally there are a series of regulatory ordinances adopted by the Ministry of Finance that have yet to be brought into effect.

“As such, I will closely examine the effective period of these ordinances and ... the many problems that were discussed, such as mental problems, debt and gambling addiction,” Fux said.

On day two of the public hearing, Fux and a fellow justice heard conflicting testimony from a dozen witnesses that included legal academics and representatives of Brazilian consumer protection association Idec and Cruzeiro football club.

Carlos Manuel Baigorri, president of Brazilian telecoms authority Anatel, said Law 14.790 should be upheld because without a specialist regulatory authority for betting it would be impractical to block illegal gambling websites operating in Brazil.

Still, Baigorri said Anatel believes the law does need to be amended to extend its blocking authority beyond internet service providers to include other types of companies.

He said Anatel had drafted proposed legal amendments and spoken with members of Brazil’s Chamber of Deputies and Senate about introducing a bill in Congress.