Prediction Markets in Canada: Where Securities End and Gaming Might Begin
Part 1 of a 3‑part series on prediction markets in Canada.
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Canada is moving prediction markets from fringe concept to regulated product, doing so through a deliberately narrow and highly conditional path. Interactive Brokers Canada launched forecast contracts in 2025, and Wealthsimple's 2026 approval brings those products into a more mainstream retail setting, confirming that Canadian regulators are prepared to permit some forms of event-based trading within the securities framework. The question now is how far the products can expand before they begin to look less like supervised financial instruments and more like gaming products that may attract the interest of provincial gaming regulators.
The central issue is not simply whether prediction markets are, in the abstract, derivatives or wagers. It seems to be how product design, distribution, marketing, surveillance, and subject matter may affect the jurisdictional analysis in real time. Wealthsimple's approval and the follow-on bulletin from the Canadian Investment Regulatory Organization (“CIRO”) suggest that Canada is developing a functional divide: event contracts can fit within the dealer and securities perimeter when they are tightly controlled, investment-adjacent, and tied to objective reference points, but similar products may lean toward a gaming characterization when they become rapid-cycle, socially sensitive, or entertainment-oriented.
How prediction markets work
Prediction markets are marketplaces in which participants trade contracts tied to uncertain future events. A simple contract may pay $1 if an event occurs and $0 if it does not, so the market price often functions as an implied probability estimate of the event's occurrence. In practical terms, these contracts allow users to express a view on whether a future condition will be met, such as whether an interest rate will exceed a threshold on a stated date or whether a benchmark will settle above a specified level.
That functional description matters because prediction markets can serve very different purposes depending on how they are built and sold. In one form, they can look like information-rich forecasting tools or highly simplified derivatives tied to macroeconomic and market outcomes. In another, they can look like consumer-facing, short-term wagers on elections, sports, or novelty events. That duality explains why they sit between securities law and gaming regulation.
Canada's current model
Canada has not created a standalone national regime for prediction markets comparable to the current U.S. CFTC framework, which remains contested by many state gaming regulators. Instead, Canadian regulators are addressing these products through overlapping securities, derivatives, and gaming concepts, with outcomes turning heavily on the legal wrapper and the product's characteristics. That fragmented structure has produced a cautious opening rather than a broad authorization.
The most important development is CIRO's March 2026 guidance on prediction markets offered by dealer members. CIRO states that only Investment Dealer Members may offer prediction markets, and only with CIRO's prior approval. The bulletin confirms that, at publication, only Interactive Brokers Canada and Wealthsimple have been approved to do so. It also imposes substantive controls, including that contracts generally must have a minimum 30-day term and cannot be offered with leverage or margin.
The subject matter approved by CIRO is equally important. The approved categories focus on economic indicators, asset prices, interest rates, broad financial benchmarks, and climate-related metrics. CIRO prohibits prediction markets tied to criminal activity, gaming, assassination, terrorism, war, and political events, including elections. Read together, those boundaries show that the Canadian prediction market developments do not constitute a general endorsement of event betting. They look more like a controlled effort to permit a narrow class of forecasting instruments that can still be defended as compatible with the dealer model, existing market-conduct supervision, and Client Focused Reforms for non-OEO clients.
Interactive Brokers' 2025 launch showed that forecast contracts could be introduced through an active-trader brokerage model, while Wealthsimple's 2026 approval suggests those products may now be scaled into mass retail channels. That shift matters because mainstream distribution can change compliance analysis, raising questions about product governance, client understanding, marketing discipline, and where provincial gaming concerns might re-enter the frame.
Ontario and the Alcohol and Gaming Commission (“AGCO”) question
Ontario remains the province where the jurisdictional overlap is most commercially significant. The AGCO regulates gaming in Ontario and treats non-sporting event wagers within the broader concept of sport and event betting or novelty betting under the iGaming regime, although availability has fluctuated. Ontario-licensed sportsbooks have offered limited novelty or political-event wagers under that regime and the AGCO, together with securities authorities, has monitored foreign prediction-market operators directed at Ontarians. Novelty bets can be permitted where outcomes are verifiable and integrity safeguards exist, even though those products are still understood as gaming rather than capital-markets instruments.
The AGCO has not directly asserted jurisdiction over the CIRO-approved forecast contracts offered by registered dealers. In fact, the jurisdictional divide between securities and gaming in Ontario is clear where the subject matter of economics or finance is concerned. The AGCO prohibits "bets on assets and financial markets (e.g., stocks, bonds, currencies, real property)" and "bets which mimic the structure of financial instruments, products, or markets." This means the entire economics/finance category is categorically off-limits through the Ontario gaming channel. Ontario has not yet needed to resolve the line publicly because CIRO's permitted products seem to remain narrow enough to avoid conflict with AGCO jurisdiction.
That makes the jurisdictional issue less a question of declared turf and more one of functional review. If an event contract is distributed through a registered dealer account, tied to objective economic or climate data, and surrounded by conventional account supervision, the case for treatment within the securities perimeter is strong. If the same contract architecture is applied to elections, sports, celebrity outcomes, or other non-economic and non-climate subjects, the gravitational pull toward gaming regulation may become stronger, regardless of whether the product is still explained with financial terminology.
A practical boundary test
A useful way to think about the CIRO-AGCO divide is through a multi-factor boundary test grounded in function over form.
1. Subject Matter
Subject matter is the clearest and most immediate signal. Economic releases, central-bank rates, market benchmarks, and climate indicators align with the categories CIRO has expressly permitted. Sports, elections, war, criminality, and similar outcomes either fall within CIRO's prohibited list or map naturally onto public-policy concerns more familiar to the gaming context. But subject matter is not the only indicator.
2. Product Structure
Product structure also matters. CIRO's 30-day minimum tenor and prohibition on leverage and margin are not incidental details; they suppress some of the high-frequency, high-stimulation characteristics associated with retail gaming-like products. If firms begin to push toward shorter duration contracts, instant recycling of positions, or mechanics that mimic rapid wagering, they should expect the product characterization analysis to become more challenging.
3. Distribution Context
The surrounding distribution framework is another important differentiator. A CIRO dealer operates inside a compliance architecture that includes KYC, KYP, account supervision, complaints handling, and surveillance, plus suitability and CFR requirements for non-OEO clients.
4. Communications and User Experience
Marketing and user experience may be the most underestimated variables. If a platform encourages clients to forecast economic releases as part of a broader trading strategy, that approach can support the securities narrative. If the same platform encourages users to have fun, back a side, follow streaks, celebrate wins with visual rewards, or treat event contracts as entertainment, it could strengthen the factual case for a gaming-style interpretation and may make AGCO concerns about inducements and consumer harm more proximate.
5. Risk controls
Risk controls could either reinforce or undermine the firm's product characterization. Market-surveillance tools, outcome-verification protocols, data-source governance, conflicts controls, and restrictions on problematic event categories support the argument that the product is being managed as a supervised financial instrument. By contrast, a weak control environment combined with broad, emotionally charged subject matter could invite scrutiny from more than one regulator at once.
Starting your prediction markets journey
Firms considering a move into or adjacent to this space should consider how to prevent product creep from outpacing governance. A compliance framework built only around current approved categories will not be sufficient if business teams begin exploring adjacent event types, new onboarding flows, or more aggressive engagement tools.
A useful operating high-level checklist would include the following:
Create a formal taxonomy of approved, prohibited, and escalated event categories, mapped directly to CIRO's bulletin and updated as new use cases emerge.
Require legal and compliance sign-off, as well as regulatory approval from CIRO, for any expansion into event types that could be framed as novelty wagering, sports-adjacent outcomes, political events, or other categories with gaming-regulatory resonance.
Review user experience, prompts, rewards, and push notifications for gaming-adjacent mechanics, particularly features that increase repetition, urgency, or emotionally driven participation.
Align marketing language and supervision with forecasting, information, and investment context rather than entertainment, fandom, or partisan expression.
Build event-specific surveillance and governance, including control over data sources, resolution procedures, unusual trading patterns, and conflicts relating to outcome-sensitive information.
Establish an escalation protocol for borderline products that contemplates not only securities-law analysis, but also gaming-law advice where a product feature materially changes the consumer or public-policy profile.
Where the jurisdictional question is heading
In the near term, Canada is unlikely to resolve prediction markets through a single grand framework, in part because jurisdiction is largely at the provincial level, leaving out federal anti-money laundering and criminal considerations. Currently, what securities law permits (economic/financial contracts), gaming law prohibits. No single Canadian pathway offers the breadth that Kalshi or Polymarket deliver in the United States, and there is no public coordination mechanism between AGCO and the securities regulators to create one.
The more plausible path is incremental boundary-setting through CIRO approvals, evolving market practice, provincial gaming responses, and selective enforcement where products become too politically sensitive, too entertainment-driven, too risk-attracting, or too difficult to supervise inside existing dealer rules. Alberta's more restrictive approach to political-event betting also shows that provincial divergence may persist rather than disappear. The next phase of the Canadian market will be shaped by whether firms treat the line between securities and gaming as a product-design discipline or engage both regulators to explore further change in prediction market regulation.
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Coming next: The second and third installments of North Star’s 3-part series on prediction markets.
Part 2: Prediction Markets in Canada: A Practical Compliance Playbook for Complex Products
Part 3: Prediction Markets in Canada: The US Example and the Canadian Opportunity
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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.
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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., and RBC Dominion Securities Inc. (Retail). 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.
Rijja Baig (B.A. University of Waterloo, B.S.W. University of Waterloo, J.D. University of Windsor) is an Associate Lawyer at North Star Legal practising in corporate, securities, and investment funds law. She completed her summer and articling terms at a national full-service law firm, where she gained experience in corporate matters, mergers and acquisitions, and securities litigation. Rijja earned her Juris Doctor from the University of Windsor Faculty of Law, and previously completed undergraduate and post-graduate studies in social work at the University of Waterloo. During law school, she served as a caseworker at Legal Assistance of Windsor, providing legal services in housing, social assistance, small claims, CERB, and immigration matters.
Read Rijja’s full bio here.