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(AsiaGameHub) –   Kalshi faces unfavorable news ahead of the FIFA World Cup as the National Monetary Council has ruled that prediction markets are not permitted to cover sports.

Brazil.- The National Monetary Council (CMN), the entity responsible for shaping Brazil’s monetary and credit policies, has issued a ruling that will restrict the function of prediction markets within the country. Its Resolution No. 5,298, endorsed by Banco Central do Brasil President Gabriel Galípolo, stipulates that contracts cannot be linked to outcomes in sports, politics, or entertainment.

The regulation, which will become effective on May 4, well before the FIFA World Cup, prohibits financial institutions from offering derivatives tied to political, electoral, social, cultural, or entertainment events. These derivatives must exclusively pertain to economic and financial assets.

In its official statement, the CMN cited the growing popularity of prediction market platforms as the reason for this action, noting that they “operate without their own regulation, unlike the betting sector,” which was regulated at the beginning of last year under Law No. 14.790/2023, signed by President Lula da Silva in late 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 were instead offering bets on a wide array of subjects.

“The predictions market violates the law passed by the National Congress. Therefore, the product offered by these platforms cannot be regulated,” Durigan stated during a press conference in Brasília.

Durigan also conveyed that President Lula remains “very concerned” about the rising number of Brazilians falling into debt due to gambling and indicated that the government is exploring new measures to “tighten” regulations and oversight. President Lula has previously expressed support for a ban on online casino gambling, which was a late addition to Brazil’s gambling regulations.

Some lawmakers are advocating for a complete ban on online betting in Brazil, which would effectively reverse last year’s regulations, though this is unlikely to garner sufficient support. In the interim, a new presidential decree concerning gambling in Brazil is anticipated to restrict access for customers receiving financial aid or those in debt, while also imposing further limitations on gambling advertisements.

The National Monetary Council’s position on prediction markets is unwelcome news for Kalshi, whose co-founder and chief operating officer Luana Lopes Lara originates from southern Brazil. Kalshi, a prominent prediction market in the US, launched in Brazil in January through a collaboration with XP Inc, marketing its platform as an investment product.

This announcement also followed closely after six companies in the sector declared their intention to establish the Brazilian Association of Predictive Markets (ABPred), an organization to represent companies interested in developing prediction market offerings. The association was founded by VoxFi, Futuriza, Eu Já Sabia, i9 Mkt Tech, Mercado Prévio, and Prévias. According to ABPred, its objective is to foster the ecosystem of binary contracts in Brazil and ensure the sector’s sustainable growth through self-regulation mechanisms and a “more transparent environment.”

The Brazilian Securities and Exchange Commission (CVM) continues to monitor the sector, but no timeframe has been set for any potential specific regulations. In Europe, there has been controversy surrounding the swift approval of a gambling license for a prediction market operator in Gibraltar.