Canadian Regulators Say Tentative No to Prediction Markets in the Country
If prediction regulators have been hoping to gain ground in Canada, they may need to readjust their strategy, as regulators are going on the offensive. A letter signed by a pair of organizations, including the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organizat…
If prediction regulators have been hoping to gain ground in Canada, they may need to readjust their strategy, as regulators are going on the offensive. A letter signed by a pair of organizations, including the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) has stated that it would not allow prediction markets to offer sports event contracts and equate them to securities or derivatives. The organizations represent a much wider body of regulators. Regulators Say Prediction Markets Won’t Be About Sports on Their Watch In the letter, the signatories note: “In light of interest in event contracts based on sports and entertainment events or outcomes, this guidance clarifies that in the view of the CSA, these should not be regulated within securities and derivatives legislation, and that CIRO does not consider it appropriate to facilitate or approve an application by their dealer members to trade these types of event contracts,” setting the regulatory guidance early. CSA is the joint organization for the provincial and territorial securities regulators, whereas CIRO is the national self-regulation organization that oversees investment dealers, mutual funds dealers, and trading activity on debt and equity marketplaces within the country. CSA chair and CEO of the Alberta Securities Commission, Stan Magidson, has flatly stated that event contracts that focus on sports – or entertainment- should not be considered financial products, nor should they be regulated as such. In the United States, federal oversight from the Commodity Futures Trading Commission (CFTC) has allowed these platforms legal leeway to argue that state gaming regulators were overstepping their remit by targeting them over event contracts, a type of financial instrument according to these platforms. Settling the Federal vs Province Debate Before It Even Started The letter acknowledged that certain members of CIRO were already authorized to issue event contracts. However, these permits come with certain restrictions. “Two CIRO dealer members have been authorized to facilitate the trading of a limited set of event contracts. These CIRO dealer members must comply with certain terms and conditions set out by CIRO, in consultation with the CSA, and such activity may be subject to further restrictions or other changes in the future. Anyone trading, or facilitating trading, in event contracts that are securities or derivatives must follow applicable requirements under securities and derivatives legislation,” the letter noted. Prediction markets have been seen as a way to skirt gambling regulation in the United States, with states and attorneys general, and governors, all launching lawsuits against the sector, and notably – Kalshi and Polymarket – which are the largest operators in the sector. The companies, including their competitors, have rallied their efforts and vowed to fight back against what they argue is state overreach. The Canadian Gaming Association (CGA) has welcomed the guidance by the regulators, calling it a clear and sensible line in terms of what is allowed and what is not.