Kalshi’s launch in Brazil has sparked debate over how exactly prediction markets fit into the country’s evolving market and strong political influence. Industry experts have questioned whether regulation would fall under the SPA of financial markets jurisdictions. Some ask whether the need for regulation is urgent or requires further time to be carefully implemented.
Earlier this month, Kalshi announced the launch of its prediction markets offering in Brazil, thanks to a deal with Brazilian brokerage firm XP International.
Brazil is Kalshi’s first market outside the US, where prediction markets have caused significant controversy, with multiple legal challenges ongoing from state gambling regulators.
The blurring of lines between financial trading and gambling has caused uncertainty among Brazil’s still-nascent fixed-odds betting sector, which itself is facing heavy pressure from politicians looking to tighten restrictions and hike taxes.
The Secretariat of Prizes and Bets (SPA), the regulator for betting in Brazil, said it was “monitoring the situation” in response to Kalshi’s launch. It also noted that no Brazilian companies were currently authorised to offer prediction markets.
Fragmented regulatory outlook
It is not yet clear which body will ultimately oversee prediction markets, with many suggesting it will likely 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, says regulation could be split three ways depending on the type of contract being traded. This, he believes, could be harmful for the market.
“There are several possible outcomes to this legal conundrum,” Seckelmann tells iGB.
“It is possible to expect that contracts of a sporting nature would tend to fall within the jurisdiction of the SPA, [while] those linked to economic and financial variables [would fall] within the regulatory scope of the CVM.
“Contracts of an electoral nature would likely be prohibited by the Superior Electoral Court (TSE), whereas events of a geopolitical, social, cultural or entertainment nature would remain within a legal grey area, at least until further regulatory consolidation,” he adds.
Regulation of prediction markets is complex
While there is broad agreement that regulation of prediction markets will eventually be required, there is less consensus on timing.
In the view of Fellipe Fraga, CBO of licensed Brazilian operator EstrelaBet, it is vital that regulation isn’t rushed at the expense of truly understanding prediction markets.
He hopes policymakers will first develop a real understanding of operators such as Kalshi and how their products differ from fixed-odds betting.
“Rushed or misaligned regulation could lead to overlaps, inconsistencies, or even unintended restrictions,” Fraga says. “The priority should be a well-informed, dialogue-driven process, allowing regulators, operators and experts to contribute to a framework that is both effective and proportionate.”
The Brazilian Institute of Responsible Gaming (IBJR) has argued that prediction markets should be brought into compliance with the fixed-odds betting legislation.
While Seckelmann says the sooner the regulatory matter is addressed the better, he too believes in taking a cautious and measured approach to avoid shoehorning prediction markets into existing frameworks.
“It can be preferable for regulation to be introduced at a later stage provided that it is properly tailored and compatible with the socioeconomic nature of prediction markets, rather than subjecting them to an automatic and rigid classification within traditional regulatory frameworks that do not adequately reflect their specific characteristics,” he explains.
Are prediction markets direct competition to betting?
A key question for the industry is whether prediction markets represent direct competition to licensed betting operators.
Fraga explains that fixed-odds betting and prediction markets are “structurally different”, with the former primarily involving a relationship between the operator and the customer, while the latter’s pricing and liquidity are driven by the market itself.
However, he does feel there could be a convergence that may result in “competitive overlap”. Fraga again calls for regulation to be carefully considered to properly differentiate the two products.
Another frustration for operators centres on the tax issue, with fixed-odds betting licensees facing a hefty burden, as well as a BRL30 million licence fee. But Fraga believes the inherent differences between betting and prediction markets make direct tax comparisons difficult.
“The economic logic is different, and therefore the fiscal treatment cannot be easily mirrored,” Fraga continues. “However, other important factors must be considered, particularly around responsible gaming, consumer protection and market integrity.
“If there is a significant migration of users from regulated operators to alternative structures that are not subject to the same obligations, this could indeed create an imbalance. Additionally, less regulated environments often have more flexibility in marketing, which can further distort competition.”
Despite the controversy and uncertainty, Fraga takes a more positive view that a company with the rapid growth of Kalshi is taking its first non-US steps in Brazil.
“Whenever a new technological or financial product enters Brazil, it is always a positive signal,” Fraga concludes. “It reinforces the attractiveness of the country and the potential of our market across multiple industries.”
Kyle Goldsmith
Kyle has been with Clarion since December 2023, joining from the world of sports journalism, subsequently becoming a LatAm-facing senior reporter with iGB.
Original article: https://igamingbusiness.com/prediction-markets/prediction-markets-split-opinion-brazil-kalshi-launch/
