Prediction markets have attracted significant attention globally, with platforms facilitating trading in contracts tied to the outcome of future events ranging from inflation and interest rates to elections and sporting events. As these markets have grown, regulators around the world have increasingly been asked to address a fundamental question: should prediction markets be regulated? And if so, as securities or derivatives, gambling or something else entirely?
Recent guidance from the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) provides the clearest indication to date of how Canadian regulators intend to approach that question.
The commercial stakes are significant. In its Q3 2026 report on Kalshi, PitchBook estimated a base-case enterprise value of approximately US$30.4 billion for Kalshi, a US prediction market. The report identified sports-related contracts as both Kalshi's largest opportunity and one of its most significant legal risks. That tension is particularly relevant in Canada, where regulators have directed sports and entertainment event contracts outside the securities and derivatives framework.
Canada's Emerging Approach
In March 2026, the CIRO established a framework permitting its dealer members to facilitate trading in limited categories of event contracts, including contracts based on economic forecasts, environmental forecasts and certain financial indicators. Contracts based on elections and other political events are explicitly prohibited by the CIRO guidance, and all contracts are required to have a maturity of at least 30 days. Under the CIRO framework, all permitted event contracts must be traded and cleared through exchanges and clearing houses regulated by the US Commodity Futures Trading Commission, and clients may not use leverage or margin accounts to transact in event contracts.
In August 2026, the CSA and CIRO provided further guidance, stating that event contracts based on sports and entertainment outcomes should not be regulated under securities and derivatives legislation and that CIRO dealer members should not facilitate trading in those products. The regulators also indicated that their assessment of other categories of event contracts remains ongoing.
Canadian clients currently access authorized event contracts through CIRO dealer members accessing regulated foreign markets.
The result is a distinctive framework in which the applicable regulatory regime depends on the category of contract at issue. This reflects Canada's divided regulatory landscape, in which securities and derivatives regulation, gaming regulation and the federal criminal-law framework may each be relevant. Regulatory treatment may depend not only on how an event contract is structured, but also on the nature of the underlying event. Products tied to economic, environmental and financial indicators may be capable of being offered through the securities and derivatives framework, while contracts with a similar structure tied to sports or entertainment outcomes may instead raise gaming law considerations. This distinction will be relevant to platforms, CIRO dealers, financial institutions, fintechs and other market participants assessing whether and how they can participate in these markets.
Key Regulatory Issues
One important challenge facing global regulators with respect to prediction markets is policy and enforcement coordination.
A central regulatory challenge is classification. Prediction market operators often argue that their products more closely resemble financial markets than traditional gambling because platforms generally act as intermediaries rather than taking positions against participants. However, regulators have reached different conclusions about similar products. Some jurisdictions treat event contracts as securities or derivatives, others as gambling products, while Canada has adopted a category-by-category approach.
A second challenge is insider trading and market integrity. As prediction markets continue to develop, financial institutions, dealers and other market participants will increasingly need to consider whether existing employee-trading, information-barrier, conflicts-of-interest and compliance policies adequately address these products, particularly where personnel may have access to confidential information relating to the underlying events or may be in a position to influence those events.
Looking Ahead
The August 2026 guidance is unlikely to be the final word on prediction markets in Canada. Both the CSA and CIRO have emphasized that their assessment of other categories of event contracts remains ongoing.
For now, Canada is taking an incremental approach. Limited categories of event contracts may be offered through authorized CIRO dealers, while sports and entertainment contracts fall outside the securities and derivatives framework. Additional categories remain under regulatory assessment, and the interaction among securities, derivatives, gaming and criminal-law regimes continues to develop.
Platforms, dealers, financial institutions, fintechs and investors considering launching, facilitating, investing in or otherwise interacting with prediction-market products should assess both the structure of the contract and the nature of the underlying event. Those factors may determine the applicable regulatory regime and the resulting licensing, distribution and compliance requirements.
If you have questions regarding prediction markets, event contracts or the evolving Canadian regulatory framework, please contact a member of Bennett Jones' Fintech, Capital Markets or Financial Services groups.
