State Lotteries and the recent Federal Supreme Court’s decision in ADPFs 492 and 493
What does the recognition of material competence and the declaration of invalidity of art. 1º, caput and 32, caput and § 1º, DL204 / 67 mean?
The Federal Supreme Court recently decided that Member States and the Federal District can exploit the public lottery service. It solved an impasse that lasted for years in Brazilian law. The Brazilian constitutional court declared the nullity of the provisions of Decree Law 204/67 (art. 1, caput, and 32, caput and §1º) and held that the Federal Union's prerogative to legislate on lottery matters does not exclude the material competence of subnational entities.
But, after all, how far does the competence of these federated entities extend to the administration of lottery activity at the regional level? Our intention is to make some notes and to encourage the debate about the most appropriate interpretation of the Supreme Tribunal Court's decision.
From the start, it is known that only the Constitution can assign competences to the federated entities (Union, States, Federal District and Municipalities).
Under the current Constitution the state members are not subordinate nor administrated by the Union; for that matter, it is forbidden to submit the states to a hierarchically inferior condition, dependent and without autonomy. Only the Constitution can change the relationship between the Union, the states members and the Federal District.
Autonomy is fundamental to the recognition and promotion of regional diversity and institutional changes at a lower level that, in case of regional success, can be adopted by the central government or other subnational entities. The autonomy of federated entities is constituted by the capacities of self-organization, self-government, self-regulation and self-administration (FERRAZ, 1979).
Material competence, in the other hand, has two aspects: administrative and financial. Both aspects “enable” the exercise of public service, in accordance with the STF’s ratio decidendi in ADPF 492 and 493 (ALMEIDA, 2013).
States members’ autonomy will be expressed both to institute State Lottery Products based on the Lottery Modalitiesprovided for in federal law, and to create a Public Administration entity that will perform the functions of a State Lottery.
The operation of the State Lottery, as well as the public service it administers, necessarily depends on the exercise of material competence in administrative and financial aspects. Therefore, the State Lottery must self-regulate, at least, on the following rules: i) the quantity, for issuance of “tickets, lists, coupons” etc., per event; ii) the periodicity of the draws; iii) the commercialization of lottery products in physical or non-physical (online) environments; iv) the destination of Lottery revenues; v) rules for direct exploitation and conditions required of the operator for indirect exploitation of the products, whether through accreditation, authorization or contracting of permissionaires and concessionaires; and vi) approval for the public interest of the creation of lottery products, supported by lottery modalities and its own layout, form of control, advertising, rules for protection and prevention of ludopathy, inspection, disclosure of results, safety and certification standards, among other issues necessary to enable the “proper” functioning of the public service.
The content of these aspects must be available to the State (or District) lottery manager for their evaluation, as a corollary of the administrative and financial dimension of the material competence of the states members and the Federal District, because only then can the functioning of the public service be adequate and current: “adequate” to the extent that it satisfies conditions of regularity, continuity, efficiency and security; and “current”, as it guarantees the modernity of techniques, equipment and installations, as defined in article 4, paragraph 2 of federal law 8.987/1995, and art. 175 of CF/88.
Only the proximity between the regional political decision maker and the lottery administration is capable of guaranteeing the above-mentioned predicates; otherwise, the administrative and financial competence of the federated entity in administration of the Lottery would be affected at once. To violate one of these material competence aspects would be to infringe material competence; therefore, it would violate the Federal Supreme Court command when it attributed material competence for the exploration and regulation of lottery services of the states.
If this were not the case, the Federal Supreme Court would have not ruled out the art. 32, §1º, DL 204/67, which limited the issuances, quantities and series of tickets by state lotteries, a matter of administrative content and linked to the viability of the Lottery.
Moreover, in addition to being part of the list of lottery activity’s essential aspects, the determination of the payout falls within the legislative competence of the states members, especially when set in a more favorable way than that provided for in federal legislation. This is because the protection of the consumer’s rights (and also of the public service user’s rights) is a matter of concurrent competence, under the terms of art. 24, VIII, of CF/88. Also, the setting of an allocation rate for regional social demands is included in the list of current legislative competence (art. 24, II, of CF/88), since when alluding to non-tax revenue originated from the state lottery activity, they have a legal nature pre-budget binding rule.
Therefore, the recognition of material competence and the declaration of invalidity of Decree-Law no. 204/67, art. 1º, caput and 32, caput, and § 1º, recognized by the Federal Supreme Court in ADPF 492 and 493, is equivalent to the admission of the administrative and financial material competences, exclusively attributed to the States (and District) Lotteries, within the scope of its territory, to make the public lottery service viable.
In effect, in face of the systematic division of competences established by the Federal Supreme Court judgement, which will become final on February 2, 2021, the Union has the opportunity to exercise a consensual dialogical role with the subnational entities, within the scope of a cooperation federalism, aiming at the realization of fundamental rights in a complementary manner, in varying degrees of protection, in attention to diversity and federative plurality, with a focus on meeting the needs of the Citizen.
Brasil Fernandes Law Firm
Roberto Carvalho Brasil Fernandes
Alexandre Amaral Filho
 FERRAZ FILHO, José Francisco Cunha. Constituição Federal Interpretada Artigo por Artigo, Parágrafo por Parágrafo. p. 4.
 FERRAZ, Anna Cândida da Cunha. Poder constituinte do estado-membro. São Paulo: Revista dos Tribunais, 1979.
 ALMEIDA, Fernanda Dias Menezes de. Coord. STRECK, Lenio, CANOTILHO, J.J. Gomes, MENDES, Gilmar Ferreira. Comentários à Constituição do Brasil. Almedina. 2013..p. 110. 701.
The CF/88 indicates social security as the destination of the revenue from the exploitation of numerical loteries, according to item III of article 195.
We quote the lesson of I Ilton Norberto Robl Filho:”the questiono f cooperation in the
federal state fies in the dialogical and participatory construction between the central government and the subnational goverments in interventions in society and in the regulation of social and legal relations. Thus, in the cooperative perspective, the main point does not lie in the expansion or noto f thefederal goverment’s power, but in the extent of the interaction between the central government and the subnational goverments of the realization of fundamental rights and the Search for the reduction of regional inequalities. “(Self-government and self-legislation of the member states in the jurisprudence of the Federal Supreme Court: direct actions of unconstitutionality and art. 25 of Brazilian Federal Constitution.. Revista Prisma Jurídico. Uninove. Link: https://www.redalyc.org/jatsRepo/934/93449444008/html/index.html#redalyc_93449444008_ref3 )