Prediction Markets: Evolving Regulation in Canada

Surging trading volumes, rapid regulatory change and well-publicized controversies in respect of United States prediction markets have brought new prominence to the regulation of prediction markets. Until this year, there had been no formal guidance provided for businesses looking to offer trading in prediction market contracts (also referred to as “event contracts”) in Canada in accordance with existing regulatory frameworks, and, in particular, there has been significant uncertainty concerning the application of securities law restrictions to the trading of event contracts. 

Helpfully, the Canadian Investment Regulatory Organization (CIRO) and the Canadian Securities Administrators (CSA) (the umbrella group of provincial and territorial securities regulators) have now set out the terms on which registered CIRO dealer-members may be permitted to facilitate trading in certain narrowly prescribed classes of event contracts. 

Furthermore, the CSA has indicated that certain event contracts, including event contracts based on the outcomes of sporting and entertainment events, are outside the scope of the securities regulatory framework and, in the view of CSA staff, such event contracts should not be regulated by securities and derivatives regulation. 

This bulletin reviews the recent CSA and CIRO notices and the securities law implications for market entrants that may wish to enter into event contracts with Canadian clients or to facilitate event contract trading on prediction market platforms. This bulletin does not discuss the potential implications for prediction market platforms and traders of provincial gaming regulation or federal Criminal Code prohibitions on a range of activities related to gambling.

What Are Prediction Markets?

Prediction markets are trading platforms that facilitate the purchase and sale of event contracts that pay out based on whether or not specific future events ultimately occur, such as whether a team will win a specific sports match, a candidate will win an electoral contest, or an economic or environmental indicator will reach a specified level. Event contracts generally have a binary payoff structure at expiry. For example, an event contract will typically pay out $1 or $0 per contract depending on whether the relevant proposition proves to be true or false (e.g., based on a “yes/no” question, such as “Will 2026 be the warmest year on record?”) or proves to be the correct choice among two or more options (e.g., “Will the winner of the 2026 World Cup be Spain, France, England or Argentina?”). The trading platform ensures that funds are available to satisfy all participants that held the correct position in respect of a particular event contract (e.g., if one participant is willing to pay 60.5 cents per contract for the proposition that the Democrats will hold the U.S. Senate after the 2026 elections and another participant is willing to pay 40.5 cents per contract against that proposition, then the trading platform will accept these matching bids, holding $1.00 per contract to pay to the participant that is correct and retaining 1 cent per contract for managing the platform).

The prices of event contracts on a trading platform fluctuate in real time based on the supply and demand of current wagers, which may be driven by real-time events related to the event contract. Accordingly, a holder of an existing position in an event contract may close out its position by selling it to another trader on the platform based on current bids, or the holder may wait until the event contract expires and the platform adjudicates which side of the event contract is entitled to receive the contract payout. 

Securities and Derivatives Law

Canadian securities and derivatives regulators (Securities Regulators) have in the past asserted jurisdiction over broad classes of contracts based on the inclusive statutory definition of the term “securities” and the regulators’ public-interest mandates. 

Ordinary event contracts were previously understood to be within the scope of jurisdiction asserted by Securities Regulators. More specifically, event contracts fall within the regulatory definition of “binary options” under a longstanding securities rule first published in 2017: Multilateral Instrument 91-102 Prohibition of Binary Options (MI 91-102). This instrument imposes a broad prohibition on trading binary options having a term to maturity of less than 30 days with any individuals. Guidance published along with MI 91-102 emphasized the Securities Regulators’ views that binary options — even longer-term contracts that are not subject to the trading prohibition under MI 91-102 — are derivatives and/or securities in each jurisdiction of Canada and therefore within the scope of Securities Regulators’ jurisdiction.

Failure to comply with MI 91-102 may lead to enforcement actions. Notably, in April 2025, the Ontario Securities Commission fined a U.S. prediction markets platform C$200,000 and banned it for two years for violating Ontario securities law by offering event contracts to individual investors in the province.

However, until earlier this year, Securities Regulators had not published any other rules or guidance detailing how securities laws apply to event contracts and prediction markets. The new guidance discussed below describes how registered investment dealers are now permitted to trade certain restricted classes of event contracts and also provides a significant securities regulatory opening for prediction market platforms to enter Canada by stating that CSA members view some classes of event contracts as outside the scope of securities and derivatives regulation. 

Securities Regulators Highlight Rules Applicable to Event Contracts That Are Securities or Derivatives

On March 26, 2026, CIRO published a bulletin (CIRO Bulletin) setting out the terms and conditions under which registered investment dealers that are CIRO members may be permitted to facilitate trading in event contracts. Subsequently, on April 2, 2026, the CSA and CIRO issued a joint news release reminding the market of the regulatory requirements governing prediction markets and event contracts in Canada. Together, these publications informed and reminded market participants that: 

• Persons trading or facilitating trading in “event contracts which are securities or derivatives” must comply with applicable securities and derivatives legislation, including requirements to obtain dealer registration or recognition as an exchange or clearing agency (and any other relevant approvals) or exemptions from those requirements.
• In all Canadian provinces and territories (other than British Columbia, which takes a different regulatory approach under local published guidance), advertising, offering, selling or otherwise trading binary options having a term to maturity of less than 30 days, with or to an individual, is prohibited pursuant to MI 91-102.
• CIRO dealer-members must seek authorization from CIRO before facilitating trading in event contracts and must comply with both (1) CIRO’s requirements regarding options trading, and (2) specific terms and conditions imposed by CIRO in consultation with the CSA, as discussed below.

Regulated Trading in Event Contracts Through CIRO Dealers

Two Canadian investment dealers have been permitted to facilitate trading in limited classes of event contracts since 2025 on terms and conditions stipulated by CIRO. In particular, these CIRO dealer-members may only trade event contracts that are traded and cleared through certain exchanges and clearing houses regulated by the U.S. Commodity Futures Trading Commission, and the following additional restrictions currently apply:

• Limited Contract Types: The CIRO Bulletin specifies that “Investment Dealer-Members’ offering of event contracts will be limited to the following: 
  • Economic forecasts: Such as contracts based on economic statistics related to sovereign debt, inflation rates, central bank reserve rates, labour markets and housing
  • Environment forecasts: Such as contracts based on climate indicators related to average global temperature
  • Financial indicators: Such as U.S. 500 Forecast Contracts that settle based on the daily settlement price of the CME E-Mini S&P 500 Futures” 
• Prohibited Contract Types: Event contracts must not be based on the outcome of (1) elections or other events of a political nature, or (2) activities that are unlawful under Canadian federal, provincial or territorial law
• Minimum Maturity: The event contracts must have an initial term to maturity of 30 days or longer
• No Leverage: Authorized dealer-members may not allow clients to use leverage or margin for transacting in event contracts

Any CIRO dealer-member seeking to trade or facilitate trading in event contracts must provide written notification to CIRO pursuant to the CIRO Rules, and specific approval from CIRO would be required to offer event contracts beyond those specifically listed above. 

Sports and Entertainment Event Contracts

On August 27, 2026, CSA and CIRO staff published a joint staff notice setting out their approach to event contracts that are based on sports or entertainment events or outcomes. 

CSA staff expressed the view that event contracts based on sports and entertainment should not be regulated within securities and derivatives legislation. Staff recognized that event contracts may fall within the broad definitions of securities or derivatives under securities and derivatives legislation, but nonetheless emphasized that, broadly speaking, there are instruments that are outside the scope of the securities regulatory framework, or are otherwise excluded from it, depending on the facts and circumstances. 

These statements may in effect be interpreted as an acknowledgment from the Canadian securities and derivatives regulators that they do not have jurisdiction over the trading on organized prediction markets of event contracts unrelated to financial or economic matters, or that they do not intend to or do not wish to assert such jurisdiction going forward. With this background, we expect that going forward the existence of another regulatory framework for event contracts (such as provincial gaming regulation in the case of sports and entertainment) will be a significant factor in determining whether Securities Regulators will seek to assert jurisdiction over a prediction market platform. This should significantly reduce the securities regulatory concerns of prediction market providers looking to provide trading access to Canadian clients.

This announcement should not be seen as changing the strict limitations on event contract trading that are specifically imposed on registered investment dealers. The joint staff notice included a statement that CIRO staff do not consider it appropriate to facilitate or approve an application by a CIRO dealer-member to trade in sports or entertainment event contracts.

Looking Ahead

In addition to signalling that sports and entertainment contracts might now be considered to be outside of the scope of the Securities Regulators’ jurisdiction, CSA and CIRO staff noted that they continue to assess other categories of event contracts, and they may identify additional ones that raise questions as to whether they are appropriately characterized as securities or derivatives.

If the CSA have ceded their jurisdiction to regulate sports and entertainment contracts, as they appear to intend, this suggests that other categories of event contracts that have little direct connection with financial markets or economic matters (such as contracts linked to political outcomes) should also be considered to fall outside of the scope of securities regulation, particularly where there is another regulatory framework for such event contracts. By extension, recognition of the limits on the scope of securities legislation based on the context or purpose of the contracts could also provide support to arguments made by some crypto industry participants for the exclusion of non-yielding stablecoins from the jurisdiction of Securities Regulators on the basis that stablecoins provide a payment and store-of-value medium and not an investment opportunity. 

The regulation of platforms offering event contracts and other novel products and assets in Canada is complex and evolving rapidly. Early engagement with counsel remains essential to efficiently and successfully navigate the changing regulatory landscape.

For more information, please contact the authors or any other member of our Capital Markets or Gaming groups.