Canadian regulators are opening the doors to prediction markets

Since then, other Canadian investment dealers have expressed interest in facilitating trading in the booming, billion-dollar prediction markets. Wealthsimple Inc. has confirmed that it received approval from CIRO to offer forecast contracts, but it has yet to announce a launch. Questrade is seeking similar approval from the regulator. Robinhood Markets, Inc., which is looking to expand into Canada with its acquisition of WonderFi Technologies Inc., currently offers these contracts in the U.S. and may seek to introduce them here too, according to industry sources.

While it’s not uncommon for innovative products launched in the U.S. to make their way to Canada, the financial services industry is divided on whether these forecast or event contracts should be widely accessible to Canadians due to their high risk and speculative nature. Some say they blur the lines between investing and gambling. Proponents of these contracts, meanwhile, say they’re useful hedging tools that allow traders to offset the economic losses of a specific real-world event and can reflect public sentiments on a range of issues.

“The ability to place, for lack of better terms, bets on events that could impact your financial welfare as a potential hedge has some merits,” said Jason Pereira, partner and senior financial planner with Woodgate Financial, which operates under IPC Securities Corp.

“The counterpoint to that is that this has basically demonstrated to be a disaster for people, based on some of the studies that are being released.”

One recent study by an equity research analyst suggested that users of prediction markets were losing money faster than on traditional gambling apps, Bloomberg reported, though prediction market giant Kalshi Inc. has disputed the study’s findings.

Getting in on the action

In recent months, prediction markets have rapidly expanded from niche to mainstream trading platforms.

Between 2024 and 2025, prediction markets trading volume surged to US$63.5 billion from US$15.8 billion, according to a report from blockchain security firm CertiK. And Eilers & Krejcik Gaming, a research and consulting firm that specializes in sports and interactive gaming sectors, forecasts that annual trading volume in these markets will reach a whopping US$1 trillion by the end of the decade.

Currently, a small number of firms — including Kalshi, Polymarket and Opinion — control the bulk of global trading volume, while other players are looking to increase their market share or get in on the action.

Forecast contracts are a type of derivative, but they differ from most traditional derivatives in terms of what they’re based on and how they pay out.

Traditional derivatives such as futures, options and swaps usually rise or fall in value with the price of an underlying asset. Forecast contracts have no underlying asset. They pay a fixed amount — usually US$1 per contract — based on whether an event happens; if it doesn’t, it typically pays nothing.

In the U.S., traders can wager on outcomes tied to elections, geopolitics, sports, markets, entertainment and climate trends. Lawmakers have scrutinized these products in recent months, due to alleged insider profiteering related to the U.S.-Israeli war on Iran and the U.S. military operation in Venezuela, which led to the capture of Venezuelan President Nicolás Maduro.

An anonymous user on Polymarket netted a $400,000 profit after betting that Maduro would be ousted by the end of January. More recently, an Israeli Air Force reservist was charged with allegedly leaking classified information to a friend who then used that knowledge to place bets on Polymarket related to Israel’s 12-day war with Iran last June.

The green light

In Canada, trading in this realm was limited until recently. In 2017, the Canadian Securities Administrators (CSA) banned the advertising and trading of binary yes-or-no contracts with retail investors that had a term to maturity of less than 30 days. And in 2025, the Ontario Securities Commission reached a settlement with operators of Polymarket for their failure to comply with the ban.

Now, with CIRO giving Interactive Brokers and Wealthsimple the green light to facilitate trading in a limited set of event contracts, we’re more fully in the game.

Interactive Brokers Canada managing director Jean-Francois Bernier, who was behind the firm’s push to seek regulatory approval for event contracts, said there are a few ways these contracts differ from the binary options that regulators banned nearly a decade ago.

For one, the recently approved event contracts have a term to maturity of at least 30 days, which removes “this element of speculation that is inherent in a very short-term contract” that lends “more to a gambling environment than investing,” he said.

Traders can “buy a contract that’s going to expire tomorrow if [they] want to, but originally the contract has to have been outstanding for at least 30 days, otherwise we cannot offer it.” Interactive Brokers incentivizes users to take long-term positions on its contracts, providing a “coupon” if they do so, like earning interest on money in a bank.

And, unlike the binary options offered to Canadians by unregistered platforms, investment dealers must be authorized by CIRO to facilitate trading in event contracts and abide by terms and conditions imposed by CIRO, in consultation with the CSA.

Those terms stipulate that dealers can’t allow clients to use leverage, including the use of margin accounts, for transacting in event contracts. Additionally, only a limited set of contracts may be offered — namely, those tied to economic indicators, financial markets and climate trends. Contracts based on the outcome of unlawful activities, elections or political events are prohibited.

Bernier hopes regulators will allow political event contracts, such as those that predict election outcomes. He also believes they could work with gaming authorities to allow sports contracts, which currently fall under gaming authority jurisdiction.

CIRO-approved contracts must be traded and cleared through certain U.S. Commodity Futures Trading Commission (CFTC) regulated exchanges and clearing houses. Interactive Brokers contracts are offered through its affiliate, ForecastEx LLC, a CFTC-registered designated contract market and derivative clearing organization. That means Interactive Brokers’ clients aren’t trading with or against the dealer itself, but via a regulated exchange, Bernier explained.

“The Canadian regulators were quite agile in dealing with our request, and obviously they consider prediction markets to be binary options, but they nonetheless felt that there was merit in our offering, that the regulatory and policy concerns surrounding the binary option rule weren’t as concerning because of the model that we’ve put in place, and also the controls, policies and procedures that we had around the offering,” he said.

The exchange that Interactive Brokers forecast contracts are offered on, ForecastEx, said it has a program designed to detect and prevent potential insider trading “and it approaches the topic from multiple angles including trade surveillance, [know your client], trading restrictions and product specific analysis.”

“When you apply for an account, you need to state your position. What do you do? What’s your role? So, if you say that you work for the Bank of Canada, you will be monitored differently than somebody who works as a high school teacher in Muskoka,” Bernier said.

In a written statement, CIRO expanded on requirements for dealers offering event contracts, saying they’re the same requirements that apply to equity options — “a derivatives account must be open, a specific derivatives agreement must be signed, adequate derivatives disclosure must be made, [and there are] supervision requirements including the detection of insider trading.”

Gambling or investing?

“A prediction is something that has inherent economic value to the market,” Bernier said.

“It’s not only a useful hedging tool for the investor, but it’s also important for the market to have as much of the predictions in these contracts, so that they become transparent, and it allows for greater transparency in the markets — provides better price discovery. And better price discovery makes markets fair for everyone.”

But not everyone is convinced these products are beneficial or should be widely offered.

To Ken Kivenko, president of Kenmar Associates, a privately-funded organization focused on investor education, prediction market trading “sounds like gambling — it doesn’t sound like investing.” He questioned why regulators are focused on making more “dangerous” products available to retail investors and is pushing for guardrails and educational materials for users.

Investor education on prediction markets in Canada has so far fallen on firms that offer this kind of trading, like Interactive Brokers.

Harvey Naglie, a consumer advocate and policy analyst focused on financial regulation, also has concerns. He noted that Canadian securities regulators established guardrails for crypto trading platforms, and “it’s not clear to me why similar guardrails were not publicly announced” in connection with these new trading platforms.

“There are no exposure limits, no eligibility screening beyond standard account approval and no client-loss limits. CIRO imposed those kinds of product-specific guardrails on crypto asset trading platforms facing comparable novel product risks,” Naglie said.

He also wonders whether CIRO consulted the gaming authorities in Canada to distinguish what activities will be overseen by the securities regulators versus the gaming authorities.

Werner Antweiler is an associate professor at the Sauder School of Business at the University of British Columbia who ran a not-for-profit prediction market in Canada for more than two decades. He said the for-profit prediction market platforms are “attracting a lot of gambling behaviour for people who enjoy taking high risks for potentially high rewards” and are “eroding the gambling monopoly that the provinces have.”

“I think some of the provinces will have something more to say if these markets actually take off at a larger scale,” he said.

“Right now, they’re small enough that it’s not a significantly large worry for our regulators, but if they were opening the door more widely to more attractive types of contracts, then we do have a significant political question outstanding.”

CIRO didn’t respond to questions about whether it consulted provincial and territorial gaming authorities before approving prediction market offerings, but said in its statement that it “regularly” engages with stakeholders.

CIRO only publicly shared the terms that apply to dealers offering forecast contracts after approvals were granted to Interactive Brokers and Wealthsimple, Naglie said, “and after significant media attention — a regulator operating proactively would have published them at the time of authorization rather than subsequently.”

The CSA, meanwhile, issued a release the same day The Globe and Mail reported that flyers promoting Polymarket were handed out in Toronto, despite the U.S.-based platform not being approved by CIRO to offer prediction market contracts in Canada or to promote them to individual investors here.

“The CSA and CIRO continue to monitor developments involving prediction markets and event contracts and intend to issue further guidance on how securities or derivatives legislation applies to them,” the CSA said in the April 2 release.

“Due to regulators’ ongoing concerns around prediction markets, the CSA and CIRO will also consider whether other regulatory action is required.”

Industry participants are watching closely.

Dan Hallett, vice-president, research and principal with HighView Financial Group, said he’s not surprised to see the industry gain a foothold in Canada.

“Wherever there is a new market, wherever there’s growth, there’s going to be interest and competition,” he said.

He added that prediction markets are run more like online casinos than traditional markets because of their “all-or-nothing” results.

But given that some Canadians are accessing these contracts through U.S. platforms using VPNs, Hallett said regulators likely believe it’s better they participate through a regulated entity in Canada, because “maybe at least they’ll have a safer way to do it, in terms of minimizing fraud.”

Jean-Paul Bureaud, executive director of investor advocacy organization FAIR Canada, doesn’t buy that logic, “because I don’t think there are many Canadians” accessing this form of trading in another jurisdiction.

His main concern is the socioeconomic impact this form of speculative trading can have on everyday Canadians. He also likened it to gambling, which has documented social and economic harms such as debt, ruined relationships and mental health issues.

“A lot of Canadians are living paycheque to paycheque. The cost of living keeps going up,” Bureaud said, while also noting that prediction markets don’t add “real value” to the economy like capital markets do.

“And so, to provide easy access to people to place bets on these prediction contracts is troubling and worrisome.”

He’s particularly concerned about Wealthsimple facilitating prediction market trading, given its relatively young and self-directed client base. Wealthsimple declined an interview request, saying it will share more information on this topic on April 30.

“It’s Wealthsimple. It’s about as Main Street as you can go,” Bureaud said.

“And most retail investors, especially do-it-yourself investors, don’t really engage in hedging strategies. In fact, most of them don’t even engage in portfolio strategies or asset allocation strategies.”

Pereira raised similar concerns: “It’s like they’re hell bent on giving Millennials everything they need to destroy their financial security,” noting that Wealthsimple targets a demographic “that is at foundational levels of establishment of their wealth.”

To address concerns of this nature, Interactive Brokers only allows investors aged 21 and older to trade forecast contracts, Bernier said. It remains to be seen whether other firms will have similar age restrictions for their forecast contracts in Canada.

CIRO also said it works “closely with firms to ensure they have the safeguards and controls needed to support safe and compliant trading.”

The regulator added, “We encourage investors to understand how event contracts work, including the risks, fees and potential outcomes, and to consider whether they are appropriate for their own circumstances.”

But the regulators’ wait-and-see approach isn’t allaying industry concerns.

“It’s not the role of a regulator to play Judge Judy on morality,” Pereira said. “We have to be deeply concerned by things that have a negative, detrimental impact to the people we serve.”