Brazil Issues Ban on Non-Financial Prediction Market Contracts

Key Takeaways:

• Brazil’s National Monetary Council banned non-financial prediction markets on April 24 via Resolution 5,298.
• Brazil is the 3rd Latam nation to ban these platforms as the Ministry of Finance targets illegal gambling.
• On May 4, the Ministry of Finance could block these sites, as it has done with other illegal gambling operations.

National Monetary Council Issues Blanket Ban On Non-Financial Prediction Markets Bets

The National Monetary Council of Brazil has published a resolution that issues a blanket ban on prediction market contracts related to non-financial underlying events.

Resolution No. 5,298, issued on April 24, established that derivative contracts related to real sporting events, virtual online gaming events, or real or virtual events of a political, electoral, social, cultural, or entertainment nature are prohibited in the country.

Similarly, the resolution establishes that derivatives tied to economic and financial benchmarks, including prices or rate indices, securities indices, bond indices, interest rates, and exchange rates; or the prices of commodities, financial assets, and securities traded on organized exchange and over-the-counter markets, will be allowed.

The measure comes after a Technical Note from the Secretariat of Prizes and Betting (SPA), Brazil’s gambling watchdog, considered that prediction market platforms “simply reproduce the essential elements of fixed quota bets.”

Dario Durigan, Brazil’s Finance Minister, stressed that existing regulations were in place for betting platforms. He stated:

The Ministry of Finance will treat these platforms as illegal gambling schemes, blocking websites and applications and coordinating with other financial institutions to stop their operations.

The regulation, which will enter into force on May 4, makes Brazil the third country in Latam to ban prediction market platforms in some capacity, after Argentina and Colombia.

Brazil’s approach is similar to what some states, including Nevada and New York, argue, claiming that under some circumstances, prediction markets fall under the classification of gambling and betting operations. Nonetheless, the Commodity Futures Trading Commission (CFTC) also claims it has exclusive oversight over these platforms and has moved to challenge states that aim to regulate or ban them.