Kalshi may find itself facing difficulties sooner than expected in Brazil, if recent statements made by the country’s betting and gaming regulator are anything to go by.
The same day that the predictions platform, one of the two biggest globally alongside Polymarket, announced its entry into Brazil, the Ministry of Finance‘s Secretariat of Prizes and Bets (SPA) made its stance on prediction markets clear.
Meanwhile, local media reports suggest that the regulated betting industry is not taking the emergence of prediction markets in Brazil particularly well.
According to Folha de São Paulo, regulated betting firms in São Paulo state have asked authorities to ban prediction platforms like Kalshi and Polymarket.
So, what is the regulatory situation around predictions in Brazil? The SPA asserts that no companies are currently permitted to offer prediction markets – however, this doesn’t mean that predictions are illegal.
What we can take from this is that essentially predictions are a grey area. With no regulations in place governing them, they are neither legal nor illegal.
For the more historically minded, this has a lot of similarities to the betting market that existed prior to the launch of its regulated counterpart on 1 January last year under the guise of the SPA.
“The Ministry of Finance’s Prize and Betting Secretariat monitors the issue continuously and technically, including in the international arena,” the SPA’s statement read.
“The prediction market is part of the Secretariat’s internal analysis agenda, with preliminary studies underway. It should be noted that, at the moment, there are no Brazilian companies formally authorized by the SPA to operate in this segment.”
Can we predict Brazil’s future?
Kalshi’s launch in Brazil was enabled by a partnership with XP International. XP’s brokerage, Clear, will serve as the local vehicle for Kalshi’s predictions platform, with customer payments made to international investment accounts on the XP Inc. subsidiary.
The move was a pretty significant one for Kalshi. The deal marks the first of its kind for the firm with a financial institution outside the US, for one thing. It also sees the company launch in one of the world’s largest betting markets, though it would disagree with the classification of its product as ‘betting’.
For the unaware, prediction markets are branded as a form of financial services, with markets covering political events and current affairs as well as sporting events.
Markets around the latter have led to accusations of them essentially being gambling platforms, while many have also drawn comparisons between the predictions markets model and that of the traditional betting exchange.
Flutter Entertainment, for example, openly noted its own experience with running a betting exchange amid speculation it would enter the predictions space last year. It ultimately did so in December when its subsidiary FanDuel launched FanDuel Predicts in the US.
Kalshi was not the first prediction platform to set up shop in Brazil – that honour is claimed by local financial institution B3, though Polymarket has been active in the grey space of Brazilian predictions for some time.
However, given the local industry pushback and the lack of a clear regulatory stance, a question mark hangs over whether Kalshi will be the last.
Companies like Flutter, which is also active in Brazil, will likely be biding their time and seeing how FanDuel Predicts plays out in the US before rolling the dice on predictions yet again with an international expansion.
There is also governmental opinion to consider, and not just that of the SPA. President Lula da Silva has been turning against the betting and gaming space, despite overseeing the introduction of the ‘Bets’ regime on 1 January last year.
Lula first came after the sector as a source of tax revenue, eventually securing a new tax framework which will see the rate on gross gaming revenue (GGR) rise from 12% to 18% by 2027. He has now turned his attention to online casinos, seeking a ban on the platforms.
Should the government’s view on predictions turn sour, the party may be over shortly after it began.