Prediction Markets in Canada: The US Example and the Canadian Opportunity
Part 3 of a 3‑part series on prediction markets in Canada.
—————
Prediction markets are now a live Canadian regulatory project, not an academic curiosity, but Canada’s cautious and regulated path will look very different from the U.S. experience with Kalshi, Polymarket, and a costly jurisdictional dispute between state gaming commissions and the Commodity Futures Trading Commission (“CFTC”).
Why Prediction Markets Matter Now
In the United States, retail-accessible event contracts on inflation, central bank decisions, elections, and even sports now trade billions of dollars per month on CFTC‑regulated venues such as Kalshi and ForecastEx, with CME and FanDuel recently entering the space. Canadian securities regulators have responded more cautiously but, as of March 2026, have publicly taken concrete steps to open a narrow corridor for regulated prediction markets. A recent regulatory bulletin from the Canadian Investment Regulatory Organization (“CIRO”) focused on prediction markets and CIRO approvals for Interactive Brokers Canada and Wealthsimple to offer prediction markets mark a decisive shift from theory to implementation.
The practical questions no longer focus on when prediction markets will arrive, but on how to grasp new opportunities in Canada, on what terms, through which regulators, and with what structural safeguards.
The U.S. Template: CFTC First, States Second
U.S. prediction markets currently sit primarily under the U.S. Commodity Exchange Act (“CEA”), with the CFTC treating retail event contracts as futures or swaps that must trade on registered Designated Contract Markets (“DCMs”) and clear through Derivatives Clearing Organizations. Once registered, DCMs like KalshiEX and ForecastEx can self‑certify new event contracts, subject to CFTC veto.
Despite intense and escalating litigation over whether the CEA pre‑empts state-level gambling laws, this large‑scale regulated activity has emerged in the U.S.: Kalshi is reportedly processing over USD 6.3 billion in monthly volume, while Polymarket exceeds USD 3.7 billion per month. Even so, enforcement actions such as the CFTC’s 2022 Polymarket settlement and the OSC’s 2025 order against Polymarket for Ontario‑facing trading underline a practical lesson for Canadians: cross‑border enforcement risk is real.
The Canadian Reality: A Provincially-Based, Dual‑Regulator World
For constitutional reasons, Canada does not have a federal derivatives regulator equivalent to the CFTC; instead, prediction markets exist between federal Criminal Code gambling provisions and provincial securities law, including the 2017 binary options ban in Multilateral Instrument 91‑102 (“MI 91-102”), which is effective in all Canadian provinces and territories except Ontario. Section 206 of the Criminal Code prohibits unlicensed betting and gaming houses, while section 207 of the Criminal Code carves out a narrow path for gambling conducted or licensed by provinces, which in Ontario means the Alcohol and Gaming Commission of Ontario (“AGCO”) and iGaming Ontario. At the same time, MI 91‑102 prohibits short‑dated binary options for all persons in Canada, with only longer‑dated, fully regulated event contracts available through registered dealers.
CIRO’s bulletin on prediction markets partially unlocks the securities pathway by explicitly permitting event contracts on economic statistics, financial indicators and certain climate metrics, while prohibiting contracts on elections, political events and unlawful activities. Two investment dealers regulated by CIRO—Interactive Brokers Canada (via ForecastEx) and Wealthsimple—are now approved by CIRO to offer such contracts, with Questrade reportedly in process. Even if an operator tried to structure a platform as derivatives instead of gambling, Canadian securities binary options restrictions outside of CIRO approval mean retail‑facing prediction market contracts remain offside without specific exemptive relief, which has not been granted to date.
In parallel, Ontario’s gaming framework permits licensed operators to offer sports betting and political or entertainment “novelty” bets, but explicitly bans bets on financial markets or products that mimic financial instruments. Ontario-licensed sportsbooks have explored “novelty” or political event wagers, but these are conventional single bets, not open, tradeable prediction market contracts, and any offerings remain subject to case‑by‑case AGCO approval under existing sport and event betting standards.
The AGCO has not created a category or framework that generally permits standalone prediction market platforms in Ontario. Currently, there is no explicit legislative or regulatory basis that would allow prediction markets to operate as a distinct, approved product type in Ontario’s gaming regime. If prediction markets were treated as gambling, they could be offered only under a provincially authorized gambling scheme (e.g., OLG/iGaming Ontario), and no such authorized prediction‑market product set has been approved.
The Boundary Problem: Where Securities End and Gaming Begins
CIRO’s bulletin answers what CIRO dealer members may do, but not when a product ceases to be a “derivative” and becomes a “bet” for AGCO and Criminal Code purposes. Consequently, there are a cluster of grey‑zone products that will demand careful consideration:
Geopolitical contracts (for example, “Will Country X default by year‑end?”) could be cast as sovereign‑debt risk or as a political novelty bet.
Corporate event contracts (M&A outcomes, CEO departures) sit between financial indicators and entertainment‑style event bets.
Regulatory and legal outcome contracts (court decisions, drug approvals) fall outside CIRO’s explicit categories and may not fit comfortably within AGCO novelty precedents.
Hybrid contracts combining financial and non‑financial conditions (for example, “BoC cut plus TSX level”) challenge both frameworks.
For practitioners, the working assumption should be that any Ontario‑facing event contract will be treated as either (a) a security/derivative requiring registration and CIRO compliance, (b) a gaming product requiring AGCO/iGO licensing, or (c) an unlawful binary option or illegal betting scheme.
The Canadian Opportunity: Narrow but Real
For CIRO members specifically, the immediate practical opportunity is to leverage the Wealthsimple precedent and follow-on bulletin. Any dealer can notify CIRO under Rule 2246(2), propose a narrowly tailored suite of economic and financial event contracts, and move quickly to attract market share before the field becomes crowded. For those who want to offer products that mirror those sold in the U.S., exemptive relief for shorter contract terms, clarifying what can be offered through a licensed gaming platform, may be in their future.
The practical opportunity may lie in occupying the regulated ground while leaving unregistered offshore platforms to bear the brunt of enforcement risk. The U.S. experience suggests that once credible, scaled operators exist, prediction markets can migrate from regulatory headache to accepted part of the financial market and gaming landscape; the Canadian challenge is to get there within a more fragmented, constitutionally constrained framework.
—————
See also the previously published articles in our Series on Prediction Markets
Part 1: Prediction Markets in Canada: Where Securities End and Gaming Might Begin
Part 2: Prediction Markets in Canada: A Practical Compliance Playbook for Complex Products
—————
Next Steps
Choose the North Star Group as your partner for legal and regulatory compliance support. North Star’s team of former compliance officers, regulators, educators, and private practice lawyers are ready to help you confirm that compliance and legal expectations are addressed, report to your stakeholders on the effectiveness of your compliance program, and, most importantly, ensure that clients’ trust in your firm is secure.
—————
About the Authors
Michael Holder (B.A. Western, LL.B. Windsor, MBA, Western) is the Managing Partner of North Star Legal, bringing more than 20 years of wealth management, legal, and compliance experience in Canada’s financial services sector. Having acted as Associate General Counsel and Chief Compliance Officer of Wealthsimple, Senior Legal Counsel at BMO Financial Group and a partner of one of Canada’s largest firms, Michael combines his practice and advisory work with teaching Fintech and Disruption of Banking at Ivey Business School.
Read Michael’s full bio here.
Martha Rafuse (B.A. Western, LL.B. Osgoode, LL.M London School of Economics), Counsel at North Star Legal, brings more than two decades of securities regulatory experience across the financial industry, private practice, and government. Before joining North Star Legal, Martha led large compliance teams for both Canadian and U.S. firms, including RBC Phillips, Hager & North Investment Counsel Inc., RBC Dominion Securities Inc. (Retail), and RBC Royal Mutual Funds. As Legal Counsel at the Ontario Securities Commission, Martha developed legal solutions for novel regulatory issues and led significant policy initiatives.
Read Martha’s full bio here.