Prediction markets are gaining significant attention in the United States, while Canada remains somewhat detached from this trend. Currently, Canadians have limited options for betting on real-world events, primarily through InteractiveBrokers’ IBKR Forecast Trader, the only regulated platform available.
However, recent developments suggest a shift may be underway. Wealthsimple has recently received approval for forecast contracts, which will effectively double the accessibility of prediction markets for Canadians. Additionally, Questrade, the largest independent online brokerage in Canada, is also looking to introduce contracts, pending regulatory approval.
Despite these advancements, Canadian prediction markets will still differ markedly from their U.S. counterparts. The existing regulations in Canada impose strict limitations, making it challenging for these markets to flourish compared to the more open environment in the U.S.
Even with regulatory green lights, Canadian law restricts operators to just three types of contracts: economic indicators, financial markets, and climate trends. This limited selection is a stark contrast to the diverse offerings in the U.S., where sports and elections dominate the landscape.
Werner Antweiler, an associate professor at UBC’s Sauder School of Business, emphasized in an interview that Canadian regulations allow for a very narrow scope of prediction markets. He noted that events such as elections, cultural or social events, and sports are not permitted for betting.
Furthermore, short-term contracts are also prohibited in Canada. The Canadian Securities Administrators (CSA) banned the sale of binary options, which are short-term yes-no event contracts, in 2017 due to concerns over fraud and investor risk. This ban prevents any advertising or trading of options with a maturity of less than 30 days, although some provinces have opted to create their own frameworks.
Consequently, the short-term binary contracts that are popular in U.S. markets cannot be offered in Canada. Even in scenarios where sports betting might be allowed, most contracts would typically resolve in a timeframe shorter than the mandated 30 days.
Canada's regulatory framework also contrasts with that of the U.S., where individual states oversee gambling while federal agencies like the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) regulate financial instruments. In Canada, the CSA acts as a coordinating body for provincial and territorial securities regulators, and the Canadian Investment Regulatory Organization (CIRO) oversees the investment sector.
Johanna Nicholson, CIRO’s manager of corporate communications, stated in an email that Canada lacks a unified national framework specifically for prediction markets. Where these markets exist as financial instruments, they are governed by the securities regulations set by provincial and territorial regulators.