Prediction markets draw divided opinions in Brazil after Kalshi’s launch

(AsiaGameHub) –   Kalshi’s entry into Brazil has ignited discussion about how prediction markets specifically fit within the nation’s developing market landscape and its significant political influence. Industry professionals have raised questions about whether regulation would fall under the SPA’s financial market jurisdictions. Others are asking if regulatory action is urgent or if more time is needed for careful implementation.

Earlier this month, Kalshi revealed the launch of its prediction market services in Brazil, facilitated by a partnership with Brazilian brokerage firm XP International.

Brazil marks Kalshi’s first market outside the US, where prediction markets have generated substantial controversy, with ongoing legal challenges from state gambling regulators.

The overlap between financial trading and gambling has created uncertainty within Brazil’s emerging fixed-odds betting sector, which is already under significant pressure from politicians aiming to strengthen regulations and increase taxes.

Brazil’s betting regulator, the Secretariat of Prizes and Bets (SPA), stated it is “monitoring the situation” following Kalshi’s launch. It also noted that no Brazilian companies are currently authorized to provide prediction markets.

Fragmented regulatory outlook

It remains unclear which entity will ultimately regulate prediction markets, with many speculating it could fall under either the SPA or the Brazilian Securities Commission (CVM).

However, Udo Seckelmann, partner and head of gambling & crypto at Bichara e Motta Advogados, suggests regulation might be divided among three entities based on the type of contract being traded. He believes this could be detrimental to the market.

“There are multiple potential resolutions to this legal puzzle,” Seckelmann tells iGB.

“It’s reasonable to anticipate that sports-related contracts would generally fall under the SPA’s jurisdiction, while those tied to economic and financial variables would come under the CVM’s regulatory purview.

“Electoral contracts would likely be banned by the Superior Electoral Court (TSE), while geopolitical, social, cultural, or entertainment events would stay in a legal gray area—at least until further regulatory clarity is achieved,” he adds.

Regulation of prediction markets is complex

While there is widespread agreement that prediction markets will eventually need regulation, there is less alignment on when this should happen.

From the perspective of Fellipe Fraga, CBO of licensed Brazilian operator EstrelaBet, it’s crucial that regulation isn’t hurried without first gaining a genuine understanding of prediction markets.

He hopes policymakers will first develop a clear grasp of operators like Kalshi and how their offerings differ from fixed-odds betting.

“Hasty or ill-aligned regulation could result in overlaps, inconsistencies, or even unintended restrictions,” Fraga states. “The focus should be on a well-informed, collaborative process that involves regulators, operators, and experts to create a framework that is both effective and balanced.”

The Brazilian Institute of Responsible Gaming (IBJR) has argued that prediction markets should comply with fixed-odds betting laws.

While Seckelmann notes that addressing the regulatory issue sooner is better, he also advocates for a cautious, deliberate approach to avoid forcing prediction markets into existing frameworks.

“It may be better to introduce regulation later if it is properly tailored to the socioeconomic nature of prediction markets, rather than automatically and rigidly classifying them under traditional regulatory frameworks that don’t adequately account for their unique features,” he explains.

Are prediction markets direct competition to betting?

A critical question for the industry is whether prediction markets directly compete with licensed betting operators.

Fraga clarifies that fixed-odds betting and prediction markets are “structurally distinct,” with the former mainly involving a direct relationship between the operator and the customer, while the latter’s pricing and liquidity are market-driven.

However, he believes there could be convergence leading to “competitive overlap.” Fraga again emphasizes the need for carefully considered regulation to clearly distinguish between the two products.

Another source of frustration for operators is taxation, as fixed-odds betting licensees face significant tax burdens and a BRL30 million license fee. But Fraga believes the inherent differences between betting and prediction markets make direct tax comparisons difficult.

“The economic rationale is distinct, so fiscal treatment can’t be directly mirrored,” Fraga continues. “However, other key factors must be considered, especially regarding responsible gaming, consumer protection, and market integrity.

“If there’s a significant shift of users from regulated operators to alternative platforms not bound by the same obligations, this could create an imbalance. Moreover, less regulated environments often have more marketing flexibility, which can further skew competition.”

Despite the controversy and uncertainty, Fraga maintains a positive outlook, noting that a rapidly growing company like Kalshi is expanding beyond the US with Brazil as its first market.

“Whenever a new technological or financial product enters Brazil, it’s always a positive sign,” Fraga concludes. “It underscores the country’s appeal and the potential of our market across various industries.”