The regulatory response echoes a pattern already well known in the country.

In 2026, discussions about the operation and regulation of prediction markets gained prominence in Brazil’s public debate. Prediction contracts tied to the FIFA World Cup and presidential elections became popular on social media, bringing to Brazil a discussion that has been consolidating internationally for some time, particularly in the United States.

However, in Brazil, innovative business models rarely gain traction without first encountering resistance. This happens because new economic activities do not always fit easily into traditional legal categories. Whether due to ignorance, caution, or the influence of groups interested in preserving the status quo, public authorities often react with distrust toward innovations that challenge established regulatory structures. Prediction markets appear to be going through this very process.

On April 23, the Secretariat of Prizes and Betting at the Brazilian Ministry of Finance prepared a Technical Note stating that, in its view, these platforms were illegally operating the fixed-odds betting modality. On the same day, the Brazilian Monetary Council (CMN – Conselho Monetário Nacional) issued Rule #5,298/2026, which treated forecast contracts as derivatives but prohibited the execution of those related to events of any theme that was not representative of an economic or financial benchmark. As a result, at least 28 platforms were blocked in the country.

Furthermore, in Rule #5,298/2026, the CMN also assigned to Brazil’s Securities and Exchange Commission (CVM – Comissão de Valores Mobiliários) the authority to adopt, within the scope of its legal powers, the measures necessary to regulate prediction markets and implement the provisions set forth in the Rule.

However, to date, more than four months after the regulation was issued, the regulatory status of prediction markets in Brazil remains unchanged. The CMN has not issued any new regulations nor has it made any further institutional pronouncements on the matter. Similarly, the CVM, responsible for the supplementary regulations foreseen in the Rule, has not yet issued resolutions, instructions, or guidelines for the market.

The CMN’s decision to restrict the types of contracts that can be traded should be highlighted as it was adopted before a more in-depth debate took place regarding the nature of these platforms and their potential risks and benefits. No studies, research, or impact analyses were released, either. The fact remains that an overly restrictive regulatory approach could limit a country’s participation in a market that is growing rapidly in other jurisdictions and attracting billions of dollars in investment.

In general, the platforms that make up this market allow the trading of contracts linked to the occurrence of future and uncertain events, such as the outcome of an election, the exchange rate of a currency on a given date, or the winner of a football match. Each contract is tied to a specific outcome and can be purchased by those who believe the event will occur (“yes”) as well as those who believe it will not occur (“no”). The prices of these contracts are determined through negotiations between the participants.

Furthermore, their operation is also different from the betting market. Instead of odds set by an operator, prices, as noted, are established through negotiations between buyers and sellers, and adjust as new information becomes available.

These markets have undergone a profound transformation in recent years, especially since 2018, with the emergence and expansion of platforms such as Kalshi and Polymarket. The advancement of technologies such as blockchain and the development of decentralized infrastructures have significantly driven their expansion.

The numbers help illustrate the scale of this growth. The monthly transaction volume in on-chain prediction markets jumped from approximately $1.2 billion at the beginning of 2025 to over $20 billion in January 2026. During the same period, companies in the sector were the target of a series of investment rounds that significantly increased their market value. Kalshi, valued at $2 billion in June 2025, was valued at $22 billion in May 2026.[1]

However, the growth of this market and its potential economic impact do not mean that it is immune to criticism or that it should operate without oversight. Like any other market, prediction markets raise a number of legitimate concerns. Issues such as information manipulation, insider trading, consumer protection, and anti-money laundering deserve attention from regulators.

Nevertheless, moves to simply ban new business models could set Brazil back, with negative economic and social consequences. This approach contrasts with the way innovative sectors typically mature. As noted, new business models rarely emerge and fit perfectly into existing legal categories. In general, it is precisely through the coexistence of innovation and oversight that its risks and the appropriate control mechanisms become clearer.

Furthermore, the Brazilian legal system includes a comprehensive framework to protect innovation, but its application often receives little attention. Free enterprise is fundamental to the economic order, and Brazil’s Economic Freedom Act establishes that innovative activities, as a rule, should not depend on prior authorization from the State. State intervention should be subsidiary, exceptional, and duly justified.

The country continues to resort to a protectionist logic which, in practice, does little to protect the consumer. In many cases, it simply relocates the activity to opaque environments that are less subject to inspection. In prediction markets, this means pushing users to foreign platforms, beyond the reach of Brazilian authorities. Furthermore, it means that the State relinquishes its role in regulating, overseeing, taxing, and developing a national market.

Still, those who oppose innovative businesses often operate according to a pattern. First, they try to fit the new activity into pre-existing categories, even if inadequately. This was the case when ride-sharing apps were considered illegal taxis and vacation rentals via Airbnb were considered hotel services. The same framing error occurs when prediction market platforms are treated as betting sites.

Furthermore, restrictive measures imposed on innovative businesses are often justified based on hypothetical risks, in an alarmist tone, without empirical evidence that their harms outweigh the benefits. This was the case, for example, when the Brazilian Data Protection Agency, in 2025, restricted the operations of the company Tools for Humanity involving iris scanning and cryptocurrency distribution.

It was widely claimed at the time that the collection of biometric data could be harmful to privacy, even though it was a common practice at the entrances of commercial buildings and gyms. Similarly, the risks attributed to prediction platforms are hypothetical or, at best, poorly understood, especially since they have not operated in Brazil for a sufficient period to allow any conclusions to be drawn.

It is also common for authorities to overstep their authority to restrict new activities. In the case of prediction markets, the CMN’s jurisdiction to institute the prohibition is questionable, both from a substantive standpoint, as prediction contracts for events of a non-economic nature do not seem to fall under its responsibility, and from a formal standpoint, as restrictions on free enterprise are only permitted through the law in the strict sense and with adequate justification.

Unfortunately, this type of resistant stance prevents Brazil from benefiting from the gains resulting from innovation. Prediction platforms have been growing exponentially and generating billions of dollars, and the consolidation of a regulated and stable market could attract considerable resources to the country. The ban, however, does not eliminate the demand for the service, and many users end up accessing foreign platforms beyond the reach of national authorities.

As mentioned, this does not mean that legitimate concerns should be ignored. On the contrary. Every innovation brings challenges, but the risks must be weighed and addressed proportionally and thoughtfully, rather than simply being used as justification for prohibition.

^[1] ROTH, Melinda. Prediction markets: creating a new asset class from ballots to box scores. Rochester, NY: SSRN, August 13 2025 (last revised: March 28, 2026), p. 33. Available at: https://ssrn.com/abstract=5390765. Accessed on August 26, 2026.

* Translation by Licks Attorneys. This content is available on the Jota.