Brazil’s gambling regulator has signalled growing unease over prediction markets after US operator Kalshi announced its entry into the country this week. It’s opening a new front in the nation’s already turbulent relationship with online wagering.

The Secretariat of Prizes and Bets (SPA) issued a statement confirming it is “continuously and technically” monitoring prediction markets following Kalshi’s partnership with Brazilian brokerage XP International, announced Monday. The deal makes Brazil the first non-US market to gain access to Kalshi’s platform, which allows users to bet on the outcomes of real-world events rather than traditional sports or casino games.

The regulatory response was swift.

Within hours of Kalshi’s announcement, the SPA clarified that no prediction market operator holds formal authorisation to operate in Brazil, and the sector remains outside the country’s existing legal framework for fixed-odds betting.

Regulatory Grey Zone Creates Uncertainty

Brazil lacks a dedicated regulatory structure for prediction markets. It’s left operators in what Andre Santa Ritta, partner at law firm Pinheiro Neto Advogados, describes as a “regulatory grey zone.” Unlike the United States, where prediction markets fall under the Commodity Futures Trading Commission as a form of derivative, Brazil has yet to classify the product or assign oversight responsibility.

“It’s not iGaming and it’s not within the framework of the fixed-odds betting industry,” Santa Ritta told industry publication iGB at ICE Barcelona. “We do not have regulations saying it is a type of derivative, so in Brazil the predictions market is still in a grey zone, which means you have a lot of opportunities for people willing to take the risks, and at the same time taking consumers out of the regulated iGaming industry. It’s another challenge.”

The SPA statement indicated the regulator is conducting preliminary studies on prediction markets. They’ve also received technical assessments from licensed betting operators, many of whom have raised concerns about the competitive implications of an unregulated parallel market.

Timing Could Hardly Be Worse

Kalshi’s expansion comes at a particularly fraught moment for Brazil’s betting sector. The regulated fixed-odds market launched on 1 January 2025, but licensed operators have already faced multiple proposals to increase tax burdens. While most failed, a graduated tax increase that will lift rates to 15% by 2028 was recently approved.

More concerning still was President Luiz Inácio Lula da Silva’s inflammatory remarks over the weekend, in which he called for a complete ban on online betting.

“Gambling dens are prohibited in Brazil,” Lula said during an International Women’s Day speech. “It makes no sense to allow gambling to enter homes, indebting families through cell phones.”

The comments sent shockwaves through an industry barely two months old. They raised questions about the government’s commitment to the regulatory framework it only just established.

Inter-Agency Coordination Ahead

The SPA has indicated it will coordinate with the Brazilian Securities and Exchange Commission (CVM) to determine the appropriate regulatory treatment for prediction markets. Whether oversight ultimately falls to the finance ministry’s SPA or the securities regulator remains an open question. The answer will likely shape how aggressively Brazil moves to either accommodate or restrict the sector.

For now, the SPA has adopted a cautious posture, emphasising “institutional responsibility” and the need to prevent regulatory gaps. That language suggests a regulator acutely aware of the risks posed by unregulated offerings siphoning revenue from the nascent licensed market, particularly at a time when political pressure on gambling is intensifying.

Kalshi’s bet on Brazil may prove prescient if the regulatory environment stabilises. But the immediate signs point to choppy waters ahead.

What the team thinks

Baz Hartley says:

Brazil’s regulators are right to watch this space closely, but they need to distinguish between genuine prediction markets and thinly disguised sports betting platforms. The real test will be how transparent Kalshi and XP are about the underlying mechanics and whether punters actually understand what they’re buying into versus a standard bet. If the wagering requirements and settlement terms aren’t crystal clear upfront, Brazilian players could end up thinking they’re making informed market predictions when they’re really just gambling with extra steps.