Brazil’s gambling regulator has signalled caution over the arrival of prediction markets in the country, following Kalshi’s entry into the market this week. The Secretariat of Prizes and Bets (SPA) confirmed it is actively monitoring the situation as the US operator becomes the first to offer prediction market services to Brazilian consumers through a partnership with local brokerage XP International.

The move marks Brazil as Kalshi’s first international expansion outside the United States, but it lands in a regulatory vacuum. Worth knowing: the SPA has made clear that no prediction market operators currently hold formal authorisation to operate in Brazil. The sector remains entirely outside the existing legal framework governing fixed-odds betting.

Regulatory Grey Zone

In a statement issued shortly after Kalshi’s launch announcement, the SPA confirmed that prediction markets form part of its internal analysis agenda, with preliminary studies already underway. The regulator is proceeding carefully. It’s received technical submissions from established betting operators who have raised concerns about the competitive implications of unregulated market entry.

The core challenge lies in determining which regulatory body should oversee prediction markets. In the US, these platforms operate under the authority of the Commodity Futures Trading Commission, classified as derivatives rather than gambling products. Brazil has yet to make that distinction, leaving the sector in what Andre Santa Ritta, partner at Pinheiro Neto Advogados, described as a “regulatory grey zone” during discussions at ICE Barcelona.

The SPA has indicated it will coordinate with the Brazilian Securities and Exchange Commission (CVM) as it develops its regulatory approach, though no timeline has been established for formal guidance. Whether prediction markets ultimately fall under securities regulation or gambling oversight remains an open question. One with major implications for both operators and the existing licensed betting sector.

Industry Tensions

The arrival of prediction markets comes at a particularly fraught moment for Brazil’s nascent regulated betting industry. Fixed-odds operators launched legally on 1 January 2025, but the sector has already weathered multiple legislative attempts to increase tax burdens. While most proposals failed, operators now face a graduated tax increase that will reach 15% by 2028.

Licensed operators have expressed concern that prediction markets could siphon customers away from the regulated space without bearing equivalent compliance costs or tax obligations. The SPA acknowledged receiving technical notes from sector companies outlining these concerns and has pledged to address the matter “with caution, institutional responsibility and a focus on preventing regulatory gaps.”

The timing is further complicated by President Luiz Inácio Lula da Silva’s recent call for a ban on online betting altogether.

In a weekend speech marking International Women’s Day, Lula urged government branches to unite against digital gambling, citing concerns over household debt. His comments, describing online betting as bringing “gambling dens” into Brazilian homes, have created fresh uncertainty for an industry still establishing its footing.

Market Opportunity Versus Risk

For Kalshi, Brazil represents a substantial market opportunity and a test case for international expansion. The partnership with XP International, one of Brazil’s leading financial services firms, provides immediate distribution infrastructure and credibility in a market unfamiliar with prediction market products.

Yet the regulatory ambiguity cuts both ways. Santa Ritta noted that while the grey zone creates “opportunities for people willing to take the risks,” it also introduces the possibility of abrupt regulatory intervention. The SPA’s statement suggests that formal guidance, when it arrives, will prioritise consistency with existing legal frameworks, potentially bringing prediction markets under stricter oversight than operators might prefer.

The broader question for Brazil’s gambling market is whether prediction markets will complement or undermine the licensed betting sector. The SPA’s cautious approach suggests regulators recognise the need to balance innovation and consumer choice against the stability of an industry that has only just begun operating within a legal framework. How quickly, and in which direction, that balance tips will determine whether Kalshi’s first mover advantage proves visionary or premature.