Brazil is preparing to formally enter the predictive derivatives market after its Securities and Exchange Commission (SEC) approved the first such products for listing on the country’s main exchange.
The products, which do not include any sports markets, will be launched by Brazil’s main stock exchange, B3, in the coming months, according to a report published this week by Valor International.
There is currently no dedicated legal framework governing this segment.
While the SEC authorised prediction markets for financial indicators by classifying them as derivatives, sports-related markets are governed by a completely separate set of laws and regulatory bodies.
B3 plans to introduce the first predictive market derivatives in the first quarter of 2026. At launch, access will be restricted to professional investors holding more than R$10m (€1.6m) in financial investments.
The initial contracts will take the form of binary options tied to the dollar, the Ibovespa index, and Bitcoin. Investors will select yes or no outcomes linked to predefined scenarios.
Market participants will be able to take positions on questions such as whether the US dollar will fall below R$5 on a specific date or whether the Ibovespa will surpass 200 points in a given month.
Contracts will function through opposing positions. If one investor stakes R$40 on the Ibovespa reaching 200 points in March and another stakes R$60 that it will not, the correct party receives the combined R$100.
Gilson Finkelsztain, president of B3, indicated that the exchange views the products as a natural extension of existing financial instruments rather than a break from established practice.
Institutional investors currently dominate that market, though individual participation has begun to increase. Masagão described the new binary products as a simple entry point designed to encourage broader investor engagement.
Only the beginning
In Brazil, the classification of sports prediction markets as betting rather than financial instruments is rooted in a legal dichotomy between the laws governing securities and lotteries.
While the US may allow event contracts to be treated as commodities under the Commodity Futures Trading Commission (CFTC), Brazil operates under a much stricter binary system.
If an activity involves a payout based on a future and uncertain event, it is legally categorised as a “lottery modality” unless it specifically meets the narrow criteria for a financial derivative.
Because a sports match does not have an underlying financial or economic asset, the SEC lacks the jurisdictional mandate to classify it as a security.
Consequently, in theory, any platform offering sports-based outcomes must fall under Law No. 14,790/2023, colloquially known as the Bets Law.
This legislation defines fixed-odds betting as a system where the bettor knows exactly how much they stand to win in relation to their stake at the moment the transaction is made.
From the perspective of Brazilian regulators, buying a “share” in a prediction market for a fixed payout could be considered functionally identical to placing a fixed-odds bet.
Therefore, regardless of whether the platform calls itself an exchange or a market, the underlying sporting nature of the event would trigger the jurisdiction of the Secretariat of Prizes and Betting (SPA) rather than the SEC.
Some companies, as is the case in the US, are looking to push the boundaries in Brazil. New private initiatives like Futuriza, which could also launch next month, are attempting to bypass the betting label with sports-related markets.
These platforms are using the Kalshi model, asserting that they don’t offer sports-related options but, instead, financial derivatives. However, this has yet to be tested in the Brazilian courts.