Prediction markets can’t take bets on sports or politics, Brazilian regulator says
Bad news for Kalshi ahead of the FIFA World Cup as the National Monetary Council rules that prediction markets can’t cover sports.
Brazil.- The National Monetary Council (CMN), the body responsible for formulating monetary and credit policies in Brazil, has made a ruling that would limit the role of prediction markets in the country. Its Resolution No. 5,298, signed by Banco Central do Brasil President Gabriel Galípolo, rules that contracts cannot be tied to sporting, political or entertainment outcomes.
The ruling, which will take effect on May 4 well in time for the FIFA World Cup, states that financial institutions are prohibited from offering derivatives linked to political, electoral, social, cultural, or entertainment events. They can only be related to economic and financial assets.
In its statement, the CMN said it was taking the move amid the popularisation of prediction market platforms “which operate without their own regulation, unlike the betting sector”, which became regulated at the start of last year under Law No. 14.790/2023 signed by President Lula da Silva at the end of 2023.
Finance Minister Dario Durigan has reported that the telecommunications agency Anatel has already blocked 28 platforms that presented themselves as providers of derivative financial products but offered bets on a wide variety of topics.
“The predictions market violates the law passed by the National Congress. Therefore, the product offered by these platforms cannot be regulated,” Durigan explained at a press conference in Brasília.
Durigan also warned that Lula remains “very concerned” about the increase in Brazilians indebted due to gambling and said the government is studying new measures to “tighten” regulation and oversight. Lula has previously said that he is in favour of banning online casino gambling, which was a late addition to Brazil’s gambling regulations.
Other lawmakers are even pushing for a ban on online betting in Brazil, which would completely reverse last year’s regulation, although this seems unlikely to gain enough support. In the meantime, a new presidential decree on gambling in Brazil is expected to restrict access to customers who receive financial assistance or are in debt while also placing more limitations on gambling ads.
The National Monetary Council’s stance on prediction markets is bad news for Kalshi, whose co-founder and chief operating officer Luana Lopes Lara hails from southern Brazil. One of the best-known prediction markets in the US, Kalshi launched in Brazil in January through a partnership with XP Inc, positioning its platform as an investment product.
The announcement also came just after six companies in the sector announced that they would create the Brazilian Association of Predictive Markets (ABPred) as an association to represent companies that want to explore prediction market offerings. The association was formed by VoxFi, Futuriza, Eu Já Sabia, i9 Mkt Tech, Mercado Prévio, and Prévias. According to ABPred, it seeks to promote the ecosystem of binary contracts in Brazil and the sustainable development of the sector under self-regulation mechanisms and a “more transparent environment”.
The Brazilian Securities and Exchange Commission (CVM) continues to monitor the sector, but no timeline has been set for any potential dedicated regulation. In Europe, there’s been controversy over the quick approval of a gambling licence for a prediction market operator in Gibraltar.
