The explosively popular online betting markets known as prediction markets are moving rapidly toward legal and institutional acceptance in the United States.
Meanwhile, in Canada, prediction markets operate in a vacuum. Provincial and federal officials do not even agree on what they are.
So far, the Ontario Securities Commission is the only Canadian authority to engage directly with prediction markets. In 2025, it barred Polymarket, one of the world’s most popular prediction markets, from operating in Ontario.
But Doug Sarro, a University of Ottawa professor who specializes in securities regulation, says the commission’s decision relied on an earlier ban on binary options that was not designed with prediction markets in mind.
“ It’s clear to me that the logic behind the [binary option] ban doesn’t really apply to these new prediction markets,” he said.
CFTC moves forward
Prediction markets allow users to trade “yes-or-no” contracts tied to whether a specific event will occur by a certain date. Individuals bet on events such as elections, sports games and corporate takeovers. Contracts pay out if a stated outcome occurs.
The world’s two largest prediction market platforms are Polymarket and Kalshi. In January, combined trading volumes on the two platforms totalled $17.45 billion.
While there is no public data on how many Canadians trade on them, the platforms list many Canadian-specific event contracts, such as whether another federal election will be called before June, and who will win the NDP leadership race.
The U.S. has broadly authorized prediction markets, including Polymarket and Kalshi, to operate in the country. The federal Commodity Futures Trading Commission regulates these platforms as “event contracts” exchanges.
“It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets,” Michael Selig, the commission’s chairman, said in a Jan. 29 speech.
“Consistent with my commitment to fostering responsible innovation in crypto asset markets, I will continue to support the responsible development of event contract markets and the important role they play in the broader financial system.”
The commission recently withdrew a proposed ban on certain political and sports-related event contracts. It signalled it would instead develop specific rules for the sector.
More broadly, U.S. regulators are evaluating surveillance, clearing and margin frameworks that would bring prediction markets into further alignment with traditional futures markets. Some U.S. legislators are also seeking to limit the ability of federal officials to participate in these markets while in office.
Square peg, round hole
By contrast, there is no enabling legislation, court rulings or regulatory decisions explicitly permitting prediction markets to operate in Canada.
A 2017 ruling by the Canadian Securities Administrators (CSA), an umbrella regulatory council for the provinces and territories, banned the sale of short-term, yes-or-no contracts that it classified as binary options.
In 2025, the Ontario Securities Commission determined that Polymarket’s event contracts violated the CSA order and were therefore illegal.
Experts agree that prediction market contracts meet the legal definition of a binary option.
“These prediction markets like Polymarket really do seem to fit that definition of a binary option, because there’s typically a short time period, and there’s a binary outcome,” Matthew Burgoyne, a partner at Osler LLP who leads the firm’s digital assets section, told Canadian Affairs in July.
But the CSA’s 2017 ruling on binary options was developed in response to a wave of fraudulent internet platforms in the mid-2010s that took investor funds without ever intending to return them.
“[Prediction markets] don’t raise the kinds of concerns that led to the ban in the first place,” Sarro said.
“ The ban is predicated on the notion that if you’ve got players offering binary options to retail clients, they’re probably just a scam … [where] even if you win your bet, you’re never going to see a payout,” he added.
“That’s not the situation we have here,” he said.
Sarro says the contemporary risks posed by prediction markets are closer to those associated with traditional securities, including manipulation, insider trading and custody of client assets.
No other provincial securities regulators have weighed in on whether the CSA’s 2017 ruling applies to prediction markets, making it unclear whether these platforms are allowed to operate in other provinces.
Officials divided
Federal finance officials have said they do not have responsibility for regulating prediction markets.
The Department of Finance told Canadian Affairs in an emailed statement that provinces and territories are responsible for regulating capital markets, “including gambling activities such as prediction markets.” It directed further questions to provincial authorities.
Karina Gould, chair of the House of Commons Standing Committee on Finance, noted that prediction markets appear to come under the purview of gambling regulators.
“I don’t know that much about these products, but from my cursory understanding it would seem they should fall under gambling rules and regulations,” she said in an emailed statement to Canadian Affairs.
“I think we probably need to understand better whether our current legislative framework is capturing this activity sufficiently and if not then we need to modernize to address it.”
The reference to prediction markets as gambling activities diverges from the Canadian Securities Administrators’ classification of the platforms as financial instruments.
Alberta Gaming, Liquor and Cannabis, the province’s gambling regulator, says its rules prohibit prediction markets and that it is working to develop a regulatory response.
“AGLC policies continue to prohibit betting opportunities on political outcomes,” an AGLC spokesperson told Canadian Affairs in an emailed statement.
“Additionally, predictions markets are not currently allowed in the province,” the spokesperson added. “With the opening of the iGaming market in Alberta, we are working with partners to determine a regulatory approach in this area.”
The Alcohol and Gaming Commission of Ontario has been similarly reluctant to weigh in.
“While we are aware of the evolving regulatory landscape in the United States, it would not be appropriate for the AGCO to comment on legal or political developments in other jurisdictions,” the regulator told Canadian Affairs in an emailed statement.
“Our focus remains on the protection of Ontarians and the enforcement of gaming-related laws and regulations under our authorities.”
Wild west
Federally, there are also no rules explicitly preventing members of Parliament from betting on prediction markets.
The Office of the Ethics Commissioner, which is responsible for preventing conflicts of interests among federal officials, has not issued guidance on whether federal ethics laws apply to prediction markets bets. As a result, public officials are not explicitly required to disclose whether they have placed prediction market bets, despite such bets potentially placing them in a conflict of interest.
Gould suggests that may need to change.
“I think like anything people are betting on, we need to ensure integrity in the system,” she said.
But she also questioned the significance of the risks.
“I don’t think this is as widespread a phenomenon at the moment to be concerned that it could impact parliamentary outcomes, but that might be a question for the Ethics Commissioner to investigate in the future and restrict the ability of parliamentarians and other decision makers to participate in this activity,” Gould said in her email.
Sarro says a workable starting point for regulation could mirror the approach provincial securities regulators have developed for crypto-asset trading platforms.
Regulators now require crypto firms to be registered, and to conduct client screening, asset segregation and market-surveillance requirements.
But Sarro says regulators may want to start by understanding how many Canadians are participating in these markets.
“I think it would be useful for our regulators to study how big these markets are in Canada,” Sarro said, noting little public information exists on domestic participation or risk exposure.
“Who’s using them?” he said. “How much money are they putting at risk?”
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