The competence of States to legislate on Lotteries.

Similar to the federal level, where Caixa Econômica Federal regulates and promotes lottery activities, the states of the Federation have their own state lotteries, legally recognized as a state public service.

This state-run public service, executed directly or indirectly through its lotteries, some established even before the federal government began operating this activity, raises numerous controversies. These controversies can be summarized as follows:
A – Regardless of federal legislation, can states operate lotteries, given their authority to do so?
B – Would the existence of federal legislation on the subject inhibit the competence of the states?
C – Does the existence of state authorization for lottery activity prevent the application of criminal law that classifies the operation of gambling as a misdemeanor?
1. The doctrine's position regarding the topic of state lotteries is unanimous concerning the legitimacy and constitutionality of the creation, by the member states of the Federation, of state lottery services, both during the validity of the legal order established by the 1967 Constitution and from the new order initiated with the promulgation of the 1988 Constitution.
Brazilian legislation regarding lotteries dates back to Decree No. 21.143/32 and later Decree-Law No. 2.980/41, which defined the activity, whether exercised by the federal sphere or by state entities, as a public service. From the enactment of Decree-Law No. 6.259 of February 10, 1944, although the competence of the member states was preserved, a requirement was introduced, consisting of ratification, by decree of the Federal Union, of state lotteries.
Existing doctrine on the subject asserts that this norm, from the moment the 1946 Federal Constitution came into effect, was excluded from the country's legal system due to unconstitutionality, as it violated the federative order imposed by that Magna Carta. The ratification requirement, despite its manifest unconstitutionality, was maintained by Decree-Law No. 204 of February 27, 1967, which, moreover, intended to establish a federal monopoly on lottery services, designating it as an exclusive service of the Union. Article 32 of Decree-Law 204 of February 27, 1967, suspended the creation of new state lotteries, while respecting those already existing. The unconstitutionality of the norm is also clear here, as it treats the entities that comprise the federation unequally.
The 1967 Constitution (subsequent to Decree-Law 204/67), and the current Constitution of 1988, do not contain any provision establishing that the public lottery service is the exclusive domain of the Federal Government.
Current federal legislation, by defining lottery activity as a public service and not as an economic activity, excludes the possibility of a federal monopoly, since any monopoly institution requires its express provision in Article 177 of the 1988 Constitution, which is not the case.
Therefore, this is a case of residual or remaining competence of the member states as provided for in Article 25, § 1 of the current Constitution, based on the federative principle of the autonomy of its entities, clearly enshrined in the constitutional text.
2. Since, by definition under federal law, a lottery is a public service and the federative entity established it by law, the hypothesis of article 51 of Decree-Law 3.688/41 (Law of Criminal Offenses) does not apply, as the offense cannot be imputed to a legal entity of public law, whose acts are presumed legitimate. Furthermore, it is a legal impossibility for the provision of a public service to be classified as a criminal offense. A public agent or a private individual authorized by the public authority cannot be the active subject of a type of criminal offense.
3. The current Constitution, of October 5, 1988, which grants the Federal Union the power to legislate on "consortia and raffles," as per its article 22, XX, did not intend to include lottery services in this provision. The concepts of "consortium" and "raffle" have been used in ordinary legislation for decades, and have never been confused with lottery activity.
The matters foreseen in article 22, XX of the Constitutional Charter are regulated by law no. 5768, of 20.12.71, and cannot, by any means, be confused with lottery services.  
 4. It should be added to the arguments above that Article 195 of the 1988 Constitution establishes that social security is financed by the entire society, “directly and indirectly, as provided by law, through resources from the budgets of the Union, the States, the Federal District and the Municipalities, and from the following social contributions (…) III – on the revenue from prediction contests.” (emphasis added). Law No. 8212/91, when regulating Article 195 of the Federal Constitution, enshrined the existence of state lotteries in §1 of its Article 26. In turn, Federal Decree No. 2.173/97, which deals with the regulation of Social Security, defines prediction contests linearly in its Article 35, §1: “A prediction contest is considered to be any and all contests of numbers and any other symbols, lotteries and bets of any nature at the Federal, State, Federal District or Municipal level, promoted by public bodies or commercial companies.” or civilians”
5. A large number of Brazilian states have organized lotteries that seek to increase their revenue through the regulation of lottery modalities, based, as seen, on the current constitutional order, namely:
Rio Grande do Sul, created by the unnumbered state decree of February 28, 1843, signed by Bento Gonçalves;
Para, created on October 3, 1856;
Rio de Janeiro, created by decree-law 138 of June 23, 1975;
São Paulo, created by decree 10120 of April 14, 1939;
Paraná, created by law 6964 of November 28, 1956;
Santa Catarina, created by law 3812 of 1966;
Espírito Santo, created by law 1928 of 1964;
Alagoas, created by law 6225 of 2001;
Federal District, created by law 1176 of July 9, 1996;
Minas Gerais, created by Federal Law No. 6.259/44 and Federal Decree-Law No. 204/67.
In addition to the states of Mato Grosso, Rondônia, Ceará, Paraíba, Goiás, and Tocantins.
Therefore, as can be demonstrated, there is no way to doubt the competence of the member states to operate lotteries, as a state public service, within the current constitutional order. 
Conclusions:
The Federal Constitution did not grant the Union exclusive rights to operate lottery services. Therefore, neither the law nor any administrative act can do so without violating the principle of federalism.
Therefore, the operation of lottery services within their territorial jurisdiction falls to the member states, based on their residual or remaining competence.
There is no, nor can there be, a "contravention" public service, and the classification of criminal offenses under the law does not apply to cases of operating lottery modalities authorized by state lotteries.
(*) Daniel Corrêa Homem de Carvalho is theLawyer, former president of Loterj (Rio de Janeiro State Lottery) and responsible for the creation of the Rio de Janeiro Bingo Lottery.