Are Prediction Markets Gambling? Brazil, Canada and the US Draw New Regulatory Lines in 2026

Prediction markets have moved from a niche forecasting experiment into one of the most contested areas of digital gambling and financial regulation. Platforms allow users to buy contracts linked to real-world outcomes - elections, sports, economic indicators, entertainment events, and even the words politicians may use in speeches.

The central regulatory question is deceptively simple: when does forecasting become gambling?

Brazil has supplied one of 2026's clearest answers. In April, Brazilian authorities moved to block prediction-market platforms, including Kalshi and Polymarket, after concluding that contracts based on political, entertainment and similar events did not fit within the country's regulated betting framework.

The decision matters beyond Brazil. Recent developments in the United States and Canada suggest regulators internationally are beginning to draw much sharper boundaries between legitimate financial derivatives and products that economically resemble wagering.

Brazil's Betting Market Makes the Prediction-Market Question Bigger

Brazil is an important testing ground because its regulated online betting industry has expanded extraordinarily quickly.

The federal regulated fixed-odds market began operating fully on January 1, 2025. According to Brazil's Secretariat of Prizes and Betting (SPA), 17.7 million Brazilians used authorized betting platforms during the first half of 2025, while operators generated approximately R$17.4 billion in gross gaming revenue. Average expenditure was estimated at R$164 per active bettor per month.

By August 2026, the government reported 85 companies had been authorized by the SPA, demonstrating how rapidly Brazil has transformed from a loosely controlled market into one of the world's most significant regulated betting jurisdictions.

But regulation has also become more interventionist.

In April 2026, Brazil's Ministry of Finance concluded that prediction markets were not compatible with the existing regulatory framework. Anatel subsequently initiated blocking procedures against prediction platforms after the National Monetary Council restricted derivatives connected to political, sporting and entertainment events.

Brazilian legislation essentially recognizes regulated fixed-odds betting around sporting events and authorized online games. That leaves prediction markets involving elections, reality television, political decisions and other external events outside the permitted structure.

The distinction is particularly significant because Brazil is effectively applying an economic-substance test: calling a product a contract, derivative or market does not automatically transform wagering on an uncertain event into conventional investment activity.

Kalshi's Nevada Setback Strengthens the Gambling Argument

Note: Kalshi is the first financial exchange in the United States to receive federal regulation for trading contracts based on future real-world event outcomes.

The same argument is now playing out through the American courts.

On August 28, 2026, the US Court of Appeals for the Ninth Circuit ruled that Kalshi could not prevent Nevada from applying its gambling regulations to the platform's sports-related prediction contracts.

Kalshi's position has been that it operates a federally regulated derivatives exchange overseen by the Commodity Futures Trading Commission (CFTC). Nevada argues that contracts based on sporting outcomes function substantially like sports wagers and therefore fall within state gambling authority.

The Ninth Circuit's ruling is particularly important because it conflicts with developments elsewhere in the United States, increasing the possibility of higher-court intervention.

The scale of the industry makes this more than an academic dispute. KPMG estimated that combined trading volume across Kalshi and Polymarket [cryptocurrency-based prediction market] exceeded $40 billion in 2025, compared with approximately $9 billion in 2024.

Prediction markets are therefore beginning to compete for consumer attention with sportsbooks, trading applications and cryptocurrency platforms simultaneously.

Prediction Markets Also Have a Genuine Financial Use Case

There is, however, an important counterargument.

Not every event contract behaves economically like recreational gambling.

Businesses are beginning to experiment with prediction contracts as hedging instruments for weather, regulatory decisions, and other risks for which conventional financial products can be expensive or unavailable. This creates a regulatory dilemma, an event contract protecting a company's revenue against extreme weather looks considerably more like risk management than a consumer betting on the winner of a football match.

This distinction could become central to regulation in 2027.

Canada Draws Its Own Line

Canada provided another important signal on August 27.

The Canadian Securities Administrators (CSA) and Canadian Investment Regulatory Organization (CIRO) issued joint guidance stating that event contracts based on sports and entertainment outcomes should not be regulated through Canada's securities and derivatives framework.

CIRO also indicated that it did not consider it appropriate to approve its investment dealers to offer those contracts.

Stan Magidson, CSA Chair and CEO of the Alberta Securities Commission, summarized the position:

“Event contracts based on sports- or entertainment-related activities or outcomes should not be regulated within securities and derivatives legislation.”

The statement is important because Canada has not rejected the entire concept of event contracts. Earlier regulatory treatment allowed certain contracts associated with financial indicators, economic forecasts and similar measurable events.

The emerging dividing line is therefore increasingly about purpose and underlying event, rather than technology.

Brazil's Responsible-Gambling Problem Cannot Be Separated From Regulation

Brazilian regulators also have strong consumer-protection reasons to proceed cautiously.

A 2024 DataSenado study found that approximately 13% of Brazilians aged 16 or older - around 22.1 million people - had participated in sports betting during the previous 30 days.

Demographically, betting remained male-dominated: 62% of bettors were men and 38% women. More than half, or 56%, were between 16 and 39.

That 38% female participation figure is nevertheless significant. Mobile gambling is increasingly broadening the betting population beyond the traditional young male sportsbook demographic. Prediction markets could accelerate that expansion because politics, entertainment, celebrity culture and reality television can attract audiences who may have little interest in conventional sports betting.

Brazil has responded with increasingly aggressive harm-prevention mechanisms. By August 2026, approximately 800,000 people affected by specified debt-renegotiation programs had been prevented from gambling on authorized platforms. When social-program beneficiaries and people using centralized self-exclusion were included, restricted accounts represented roughly 10% of the approximately 40 million active people registered in Brazil's SIGAP betting-management system.

For prediction-market operators, this illustrates the difficulty of arguing that consumer event contracts should receive lighter oversight than sportsbooks when the behavioral mechanics can be remarkably similar.

The UK Shows the Direction of Travel

Europe provides another warning.

On August 28, Britain's Gambling Commission suspended the operating licenses of BresBet Ltd and Bet St George Ltd following suspected social-responsibility and anti-money-laundering failures.

Although this case does not concern prediction markets directly, it demonstrates the broader regulatory environment into which these products are expanding.

Licensing alone is no longer enough. Regulators increasingly expect operators to demonstrate ongoing AML controls, affordability protections, responsible-gambling systems and effective consumer monitoring.

SWOT Analysis: Prediction Markets Heading Into 2027

2027 Forecast: Prediction Markets Split Into Two Categories

The most plausible 2027 scenario is not the disappearance of prediction markets. Instead, the market is likely to split.

The first category will consist of financially defensible contracts connected to weather, economic indicators, commodities, and commercial risk. These products have a stronger argument for treatment as derivatives or risk-management instruments.

The second will include sports, elections, entertainment and celebrity-driven contracts. Regulators are increasingly likely to view these through a gambling or gambling-like consumer-protection framework.

Brazil has already moved decisively in that direction. Canada has now explicitly separated sports and entertainment contracts from its securities framework. Nevada's victory against Kalshi strengthens the same argument in the United States.

For casino and betting operators, the opportunity is therefore not simply to add “prediction markets” to existing apps. Differentiation in 2027 is more likely to come from transparent product classification, responsible-gambling technology, stronger identity and affordability controls, explainable probabilities and clear separation between financial hedging and recreational wagering.

The prediction-market boom is unlikely to end. But 2026 may ultimately be remembered as the year regulators stopped asking what these platforms called themselves and started asking what consumers were actually doing with them.

Works Cited / References

Agência Nacional de Telecomunicações. (2026, April 24). Anatel viabiliza bloqueio de plataformas de apostas preditivas após determinação do Ministério da Fazenda. Government of Brazil.
Anatel – Prediction Market Blocking Notice

Canadian Securities Administrators. (2026, August 27). Prediction markets: CSA and CIRO provide guidance on certain types of event contracts.
CSA – Prediction Markets Guidance

Commodity Futures Trading Commission. (2026, February 25). CFTC Enforcement Division issues prediction markets advisory.
CFTC – Prediction Markets Advisory

DataSenado. (2024). Panorama Político 2024: Apostas esportivas, golpes digitais e endividamento. Senado Federal.
DataSenado – Sports Betting Research

KPMG. (2026). Prediction markets: Paths to entry. KPMG US.

Ministério da Fazenda. (2026). Apostas de quota fixa. Secretaria de Prêmios e Apostas, Government of Brazil.
Brazil Ministry of Finance – Fixed-Odds Betting

Ministério da Fazenda. (2026, August 13). Cerca de 800 mil pessoas estão impedidas de apostar após renegociação de dívidas. Government of Brazil.

Reuters. (2026, August 28). Kalshi cannot block Nevada oversight of prediction markets, US appeals court rules.

UK Gambling Commission. (2026, August 28). Suspension of licences – BresBet Ltd and Bet St George Ltd.
UK Gambling Commission – Licence Suspensions