Regulated prediction markets in Canada shouldn’t be able to offer sports or entertainment contracts as securities, according to a statement issued by the nation’s securities regulators.
The news: The Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) published a joint notice on Thursday saying that contracts relating to sports and entertainment events should not be regulated as securities or derivatives, and that CIRO won’t allow its members to offer these types of contracts.
In Canada, regulated contract dealers (currently Wealthsimple and Interactive Brokers) under CIRO can offer event contracts related to economic indicators, climate-related events, and financial markets.CSA and CIRO said in their joint release that other types of event contracts are still being assessed.
From the source: “I definitely understand CIRO’s logic here: sports and entertainment outcomes are hard to regulate and look much more like gaming than securities,” Noah Billick, a partner at Montréal law firm Renno & Co, wrote in a LinkedIn post. “My concern is this: given the interconnected world we live in, and the ease with which Canadian residents can access prediction markets that are not regulated in Canada, is this simply going to push Canadians into less-regulated, shadowy corners of the prediction markets space?”
The context: The statement from regulators comes shortly after Wealthsimple, which launched a prediction markets app this summer, argued in a whitepaper that dividing up the regulatory oversight of derivatives instruments by subject matter is the “wrong approach” for regulators. For instance, Wealthsimple’s paper said, putting sports outcomes under gaming regulation while financial outcomes are treated as securities would be “unworkable.” In response to a request for comment on CSA and CIRO’s statement today, Wealthsimple referred BetaKit to the whitepaper.
Final thought: While sports and entertainment event contracts won’t be permitted by CIRO for now, Wealthsimple is still teasing the offering: its app displays some of these markets, such as trades on Academy Award nominations, with a feature to notify the user once it becomes available in Canada.
Regulation for these markets is up in the air elsewhere, too. More than 20 US states have sued prediction market operators like Kalshi and Polymarket over whether they should be subject to state laws on sports gambling.
Disclosure: Wealthsimple vice-president of payments strategy and chief compliance officer, Hanna Zaidi, sits on BetaKit’s board of directors.
Feature image courtesy Wealthsimple.