The Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) announced on August 27th that they will not permit sports and entertainment prediction market event contracts in Canada.
“It is important for investors and market participants to understand that event contracts based on sports- or entertainment-related activities or outcomes should not be regulated within securities and derivatives legislation,” said Stan Magidson, CSA chair and chair and CEO of the Alberta Securities Commission.
“This notice provides important clarifications regarding the role and responsibility of Canadian securities regulators when it comes to certain types of event contracts.”
Regulators Set Clear Boundaries
In March, CIRO announced it would allow investment management service Wealthsimple to establish prediction market trading for event contracts surrounding financial markets, climate, and economic indicators.
Interactive Brokers Canada Inc. is the only other CIRO Investment Dealer Member authorized to facilitate trading in event contracts.
The CSA acts as an umbrella organization to coordinate provincial and territorial securities regulators in Canada to harmonize rules across capital markets in the nation.
Financial Contracts Remain Allowed
CIRO serves as the national self-regulatory organization governing investment dealers, mutual fund dealers, and trading activities within Canadian debt and equity markets.
Yesterday’s announcement indicates that the Canadian prediction market will not follow the example set by the United States.
Companies like Polymarket and Novig are currently offering sports event contracts nationwide in the U.S. under federal authority granted by the Commodity Futures Trading Commission (CFTC).
Canada Disagrees with U.S. Approach
These companies along with the CFTC are facing numerous lawsuits regarding the legality of prediction market platforms, with the companies and the CFTC against states, attorneys general, and gaming regulators, debating whether federal derivative laws supersede state gaming laws.
The joint announcement by CSA and CIRO received praise from the Canadian Gaming Association (CGA), the national body collaborating with operators, suppliers, and other stakeholders in the regulated iGaming industry.
Canadian Gaming Association Embraces Clarity
CGA President and CEO Paul Burns stated that sports event contracts equate to sports betting.
Sports gambling on prediction market platforms poses risks related to anti-money laundering controls, responsible gambling measures, and know-your-customer checks, which provincial gaming regulators are equipped to handle.
“The Canadian Gaming Association welcomes yesterday’s (Aug. 27) guidance from CSA and CIRO staff,” said Burns. “It provides clarity on a significant matter for Canadian consumers, provincial governments, and the licensed gaming industry.
“Online gaming and sports betting are entertainment products. The CGA acknowledges that more companies may seek to enter prediction markets and that securities regulations may develop over time. The Association is prepared to collaborate with CSA, CIRO, and provincial regulators as further guidance is established and to support initiatives to ensure a consistent, high level of consumer protection for sports betting across Canada, irrespective of how a product is structured or marketed.”
Questioning Regulatory Logic
Evan Thomas, a fintech advisor based in Toronto, told Casino.org that while the decision by CSA and CIRO not to expand event contracts available through Canadian investment dealers was expected, the absence of justification was notable.
“CSA staff acknowledge that event contracts may fall within the broad definitions of securities or derivatives, then conclude that sports and entertainment contracts should not be regulated within that framework, without explaining why,” he said.
“The notice provides no legal analysis and no policy rationale either. This is disappointing because if securities regulators make a significant policy decision like this, they should be transparent and provide reasons.”
Provincial Gaming Option Persists
Thomas added that the staff notice eliminates a path for sports contracts with a functioning framework: products traded and cleared on U.S.-regulated exchanges reaching Canadians through registered investment dealers, all under CIRO supervision.
“This solidifies a disconnect with the U.S., where sports event contracts currently trade on CFTC-regulated exchanges under a unified federal framework,” Thomas explained.
The only potential avenue for sports event contracts is through provincial gaming registration, which is less appealing to companies like Polymarket while they argue in U.S. courts that their products are derivatives, not gaming.