Canada: Financial Regulators Reject Oversight of Prediction Markets

A significant decision has been made in Canada that carries far-reaching implications for both the gambling and financial sectors. National securities regulators have clarified that they are not responsible for overseeing prediction markets based on sports or entertainment outcomes. This decision affects a sector that is already growing rapidly in the U.S., where platforms have formed partnerships with major organizations like the NHL and MLB. In Canada, the legal status of these contracts remains in a gray area for now, as financial watchdogs simply do not view them as investment products.

The decision was announced through a joint notice from the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO). They stated that such wagers do not meet the criteria for instruments overseen by investment regulators. Consequently, offering these markets on platforms supervised by them remains prohibited. This has caused frustration among companies already active in legal financial forecasting that wish to expand their portfolios.

Numbers and facts

The economic relevance of this market is substantial. Analysts at Citizens Financial Group predict that the global volume of prediction markets could rise from approximately US$2 billion in late 2025 to over US$10 billion by 2030. Currently, only two companies in Canada, Wealthsimple and Interactive Brokers, have CIRO approval for event contracts. However, this permission is strictly limited to economic, financial, or climate-related topics. Sports events or political bets are explicitly excluded.

A particularly sensitive case involved a US soldier who was charged in the United States for using classified intelligence to win over US$400,000 on a bet regarding a military operation to capture Nicolas Maduro. Such incidents fuel fears of insider trading within prediction markets. In Canada, some financial institutions have already introduced policies prohibiting employees from betting on certain types of events.

Background

The debate centers on the mechanical nature of the products. Wealthsimple argued in a white paper that a contract on the outcome of a soccer match is technically identical to a contract on the inflation rate. The firm's legal team contends that splitting regulation into different regimes does not work in practice. Nevertheless, regulators remain firm. Liberal MP Karina Gould, chair of the House finance committee, advocates for these markets to be strictly governed by gambling laws.

"A contract on the outcome of a soccer match and a contract on the level of inflation are, mechanically, the same instrument." - Blair Wiley, Chief Legal Officer at Wealthsimple

While U.S. platforms like Kalshi and Polymarket already act as partners for CNN or Major League Baseball, the situation in Canada is stalled. The CSA emphasized that the assessment for political wagers is ongoing, creating further uncertainty for the market. Proponents of prediction markets see them as valuable sources of information for public opinion, while skeptics emphasize the risk of addiction and lack of player protection.

Why it matters for German players

For German players, the situation is clearly regulated, standing in stark contrast to the current developments in Canada. In Germany, bets on the outcome of sports or social events fall under the Interstate Treaty on Gambling 2021 (GlüStV 2021). A mixing of financial products and gambling, as discussed in Canada, is legally prohibited here. Anyone wishing to bet legally in Germany must use providers listed on the whitelist of the Gemeinsame Glücksspielbehörde der Länder (GGL). These platforms are subject to strict controls.

Players in Germany benefit from the LUGAS system, which ensures a monthly cross-operator deposit limit of 1,000 euros. Additionally, a stake limit of 1 euro per spin applies to online slots. These measures serve player protection and prevent excessive gambling behavior. Prediction markets disguised as financial products would struggle to gain approval in Germany, as they would have to meet strict transparency and addiction prevention requirements. German users should therefore strictly avoid offers from Curacao or the MGA, as they do not offer the high safety standards of the GGL.

What it means for GGL-licensed casinos

For operators with a GGL license, the Canadian discussion serves as a confirmation of the German approach. The strict separation of the financial market and gambling protects the industry's image. Casinos and sports betting providers in Germany can rely on the fact that the legislature has created clear frameworks for event betting. This prevents market distortions by actors trying to occupy less-regulated niches via securities law. GGL oversight ensures that integrity and player protection remain at the forefront, promoting long-term market stability.