Brazil’s gambling regulator has raised a cautionary flag following Kalshi’s entrance into the market this week, highlighting the regulatory vacuum surrounding prediction markets in Latin America’s largest economy.

The Secretariat of Prizes and Bets (SPA) issued a statement confirming it is “continuously and technically” monitoring prediction markets after Kalshi announced a partnership with Brazilian brokerage XP International on Monday. The deal marks Brazil as the first non-US market where Kalshi’s prediction platform will be available to retail participants. A significant international expansion for the US operator.

The timing is particularly delicate. Brazil’s regulated fixed-odds betting sector only launched on 1 January 2025, and operators are already navigating a volatile political and fiscal environment. A gradual tax increase to 15% from 2028 was recently approved, and President Luiz Inácio Lula da Silva used a weekend speech to call for a complete ban on online betting, describing digital platforms as mechanisms that “indebt families and destroy homes.”

Regulatory Grey Zone

Unlike traditional sports betting, prediction markets occupy an ambiguous space in Brazilian law. The SPA acknowledged receiving technical assessments from fixed-odds operators who have flagged concerns over the new entrants, but stressed no companies are currently authorised to operate prediction markets in Brazil.

“The prediction market is part of the Secretariat’s internal analysis agenda, with preliminary studies under way,” the regulator stated. “The Secretariat is addressing the issue with caution, institutional responsibility and a focus on preventing regulatory gaps.”

The challenge lies in jurisdictional classification. In the United States, prediction markets fall under the Commodity Futures Trading Commission as derivatives instruments. Brazil has yet to decide whether such platforms should be regulated by the SPA or the Brazilian Securities and Exchange Commission (CVM), creating what legal experts describe as structural uncertainty.

Industry Concerns and Market Impact

Andre Santa Ritta, a partner at law firm Pinheiro Neto Advogados, told industry observers at ICE Barcelona that prediction markets represent another “turbulent” element for Brazil’s nascent regulated betting sector. The concern centres on consumer migration, with licensed operators potentially losing market share to platforms operating outside the fixed-odds framework.

“In Brazil, you have this regulatory grey zone in which we don’t know yet where to place the prediction market industry,” Santa Ritta explained. “It’s not iGaming and it’s not within the framework of fixed-odds betting. We do not have regulations saying it is a type of derivative, so you have a lot of opportunities for people willing to take the risks, and at the same time taking consumers out of the regulated industry.”

For Kalshi, the Brazilian launch is a calculated bet on regulatory tolerance during a formative period. Whether that gamble pays off will depend on how quickly the SPA and CVM can agree on a framework, and whether prediction markets are ultimately folded into the existing betting regime or carved out as a separate asset class entirely.

What the team thinks

Sheena McAllister says:

Brazil’s SPA is taking precisely the right approach here by monitoring first rather than rushing to classify prediction markets under existing frameworks that may not fit. The regulatory vacuum Kalshi is entering actually presents an opportunity for Brazil to develop bespoke rules that distinguish prediction markets from traditional gambling, something we’ve seen work well in certain US state approaches. This could position Brazil as a more sophisticated regulatory model for Latin America if they resist the temptation to simply shoehorn these products into sports betting or derivatives regulation.