The Canadian investment and securities regulators have issued new guidance that firmly prohibits prediction markets related to sports and entertainment events.
On Thursday, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) released a joint statement reaffirming the ban on contracts tied to sports and entertainment.
While acknowledging that such event contracts could potentially be classified as securities or derivatives under Canadian law, the regulators emphasized that they remain outside the regulatory framework.
The CSA and CIRO both maintain a consistent position: Event Contracts based on sports and entertainment should not fall under the securities and derivatives regulations. CIRO staff also expressed that it would be inappropriate to approve applications from their dealer members for trading these types of contracts.
This guidance follows a CIRO bulletin from March 26, which reminded members that Canadian law forbids contracts based on election outcomes or political events.
In the latest update, the regulators stated that other categories of event contracts are still under consideration, with further guidance expected in the future. Currently, only contracts related to economic, environmental, or financial indicators are allowed for trading.
Additionally, they reiterated that short-term binary options, which have a maturity period of less than 30 days, cannot be offered to individual investors. This restriction would effectively eliminate many popular sports and entertainment contracts found in the U.S.
In Canada, prediction markets operate differently than in the U.S. While U.S. states regulate gambling and the SEC and CFTC oversee financial instruments, the CSA serves as a cooperative body for provincial regulators. CIRO acts as the national self-regulatory organization for the investment sector.
Canadians can only bet on real-world events through two regulated platforms: Interactive Brokers’ IBKR Forecast Trader and Wealthsimple’s Predict. Questrade has indicated plans to offer contracts but awaits regulatory approval. Ontario's STX exchange is also pursuing CFTC registration.
The existing ban on short-term binary options complicates the situation further. The CSA prohibited their sale in 2017 due to concerns over fraud and investor risk, blocking any advertising or trading of options maturing in less than 30 days. Only British Columbia has opted out of this rule by creating its own framework that bans short-term contracts.