The U.S. prediction market platform Kalshi made a high-profile entry into Brazil, causing a significant "earthquake" in the local gambling industry. There is a division within the industry about who should regulate these products and whether to act quickly or slowly. Some believe that they should be immediately included under the gambling regulatory framework, while others advocate for a clearer understanding before taking action, avoiding a hasty "one-size-fits-all" approach. The PASA official website noted that this incident reflects the increasingly blurred boundaries between emerging financial products and traditional gambling.
The catalyst for this controversy was Kalshi's landing in Brazil through the Brazilian brokerage firm XP International. As Kalshi's first market outside the United States, this move was quite eye-catching. However, in the U.S., the prediction market itself is deeply embroiled in numerous legal disputes, with many state gambling regulatory bodies suing it. Now this fire has spread to Brazil, where the nascent fixed-odds gambling industry is also feeling significant pressure—after all, there are already many voices within Brazilian politics calling for tighter gambling controls and higher taxes.
The Brazilian gambling regulatory body—the Secretariat of Prizes and Gambling (SPA)—responded to Kalshi with restraint, merely stating that it is "watching the situation develop" and emphasizing that no Brazilian company has been authorized to operate a prediction market business. This statement sounds stable, but the underlying attitude is quite subtle: neither directly halting nor clearly permitting.
Three departments vying for one "piece of the cake," who has the final say?
The biggest uncertainty right now is which department should regulate the prediction market. It is commonly believed within the industry that it should be either the SPA or the Brazilian Securities and Exchange Commission (CVM). However, Udo Seckelmann, a partner at the law firm Bichara e Motta Advogados, believes it might not be that simple, and it is very likely that three types of contracts will be regulated by three different departments.
Seckelmann provided a clear breakdown to iGB:
Sports contracts: Likely to be regulated by the SPA.
Contracts linked to economic and financial variables: Should fall under the regulatory scope of the CVM.
Election-related contracts: Likely to be directly halted by the Superior Electoral Court (TSE).
Geopolitical, social, cultural, entertainment, and other types: Sorry, still can't find a "mother" for them, they have to stay in the legal gray area until the day the regulators sort this out.
This "many dragons controlling the water" situation, as Seckelmann himself believes, is not good for the market. A product having to cater to three or four regulatory bodies means high compliance costs and great uncertainty.
Should we rush to regulate, or should we first understand clearly before acting?
Although everyone acknowledges that the prediction market will eventually need to be regulated, there is a significant divergence on "when to act."
Fellipe Fraga, the Chief Commercial Officer of the licensed operator EstrelaBet in Brazil, has a clear stance: better slow than wrong. He believes that regulatory bodies need to first understand how products like Kalshi operate and what fundamentally distinguishes them from traditional fixed-odds gambling before applying old frameworks.
"Hasty, misaligned regulation only leads to overlaps, contradictions, and even unnecessary restrictions," Fraga said. He advocates for a process of "full understanding and full dialogue," allowing regulators, operators, and experts to sit down together to build a framework that is both effective and reasonable.
The Brazilian Institute for Responsible Gambling (IBJR) leans more towards "following current rules," believing that the prediction market should be included in the existing fixed-odds gambling legislative system. Although Seckelmann also agrees that regulation should come sooner rather than later, he also emphasizes not to force it into an old framework.
He made an analogy: "Rather than forcing the prediction market into a traditional framework that doesn't suit it, it's better to come out later with rules that truly fit its socio-economic characteristics. Automatic, rigid categorization, on the other hand, fails to reflect the special nature of these products."
Competing with gambling for business, or not stepping on each other's toes?
For operators in Brazil who have spent a lot of money on licenses, there's another more practical issue: Is a platform like Kalshi competing with them for business?
Fraga's view is that fixed-odds gambling and the prediction market have completely different underlying logics. The former involves a betting relationship between the operator and the player, with odds set by the operator; the latter's prices and liquidity are entirely driven by the market itself, with players trading among themselves. However, he also acknowledges that there is indeed an overlap in user groups and usage scenarios between the two, and if they are not differentiated and compete in the same market, they will eventually clash.
Another point of dissatisfaction for operators is taxation. Just the application fee for a fixed-odds gambling license in Brazil costs 30 million reais, and there are taxes to be paid during operation, which is not a light burden. While Fraga believes that the economic logic of the two is different, and thus tax treatment cannot be simply equivalent, one thing must be considered: "If a large number of users move from regulated operators to a structure not bound by the same rules, the competition is definitely unfair. Moreover, places with less regulation have greater marketing freedom, which further distorts competition."
Despite the controversies, Fraga still holds a positive attitude towards Kalshi's entry into Brazil. "A company that is growing so fast choosing Brazil as its first stop outside the United States is a positive signal," he said. "This shows that Brazil's attractiveness for emerging products and technologies is increasing, and our market potential is being recognized."
The PASA official website also noted that the boundary dispute between the prediction market and gambling in Brazil is just the beginning. As more similar products enter global emerging markets, how regulations are implemented and how the industry adjusts will continue to be an unavoidable topic for a long time to come.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
Original in-depth gambling channel: https://t.me/gamblingdeep
Free data reports: @pasa_research
PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
