Canadian lottery groups push for stronger prediction market restrictions
Canada’s provincial lottery corporations are seeking stricter controls on prediction markets, arguing that some event contracts available through investment platforms resemble betting and should be subject to additional safeguards.
This comes after last week the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) clarified in a joint statement that contracts based on sports and entertainment outcomes should not be treated as securities or derivatives. The authorities argue that the contracts cannot be offered through regulated investment platforms.
Now, according to the Globe and Mail, the Canadian Lottery Coalition (CLC) – which represents publicly owned lottery and gaming organizations in seven provinces – has registered to lobby provincial officials on the issue.
It said that prediction markets could divert spending away from provincially regulated gambling, where revenue is returned to governments to fund public services.
Molly Cormier, executive director of the CLC, commented of the recent joint letter noting, “We appreciate the further clarity, but I just feel like it’s too far to say that it’s a line in the sand. The time to act is now before they expand further in Canada.”
Two companies, financial services company Interactive Brokers Group and online investment management service Wealthsimple, have received CIRO approval to offer certain prediction market contracts to Canadian customers, with Wealthsimple partnering with US prediction market Kalshi.
Their permitted products do not cover sporting events or election results, and are limited to economic, financial or climate-related events.
CIRO spokesperson Ariel Visconti said that qualifying contracts are “regulated as options contracts and are subject to the same regulatory oversight as all other listed options offered by CIRO dealer members.”
CSA spokesperson Ilana Kelemen added, “CSA members have consulted a wide range of stakeholders over the past several months, including local gaming regulators, and intend to continue to do so in the future as assessments in this area continue.”
Prediction markets have expanded across North America, creating questions over whether event contracts should fall under gambling or financial regulation.
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The Backstory
Regulators draw a boundary around sports contracts
Canada’s latest fight over prediction markets did not start with lottery corporations. It began with securities regulators trying to define what could, and could not, be sold through investment platforms as event contracts.
The Canadian Securities Administrators and the Canadian Investment Regulatory Organization moved first, publishing guidance that said sports and entertainment event contracts should not be treated as securities or derivatives. The position, outlined in a joint Canadian regulatory notice rejecting sports prediction markets, effectively told regulated investment dealers that sports outcomes were outside the lane of capital markets oversight.
That mattered because prediction markets have grown by presenting contracts on real-world outcomes as financial products rather than wagers. The distinction is central to the business model. If an event contract is a derivative, it can be handled through securities infrastructure. If it is gambling, it falls under provincial gaming law and the web of licensing, responsible gambling and revenue-sharing requirements attached to that system.
The Canadian notice did not ban all prediction markets. It left room for contracts tied to economic forecasts, environmental indicators and financial measures. CIRO had already allowed Interactive Brokers Canada Inc. and Wealthbrokers Inc. to facilitate access to a limited set of such products, with restrictions. But the agencies drew a sharper line at sports and entertainment, saying they should not be accommodated within securities and derivatives rules.
Lottery corporations see a revenue threat
For provincial lottery corporations, the regulatory guidance answered one question but raised another. If sports prediction contracts do not belong in securities markets, lottery groups argue governments must ensure they do not enter Canada through another door without gambling safeguards.
That concern reflects the structure of Canadian gambling. Provincial governments control and manage legal lottery, casino, sports betting and many online gambling products, either directly or through lottery corporations. Profits are returned to provinces to support public services. Prediction markets that compete for the same customer dollars without the same obligations could weaken that model.
The issue fits into a broader defensive posture by Canadian lottery operators. They have already been confronting offshore and gray-market gambling sites that market to residents while operating outside provincial systems. Atlantic Lottery Corporation’s new leader described that pressure in an interview about how the region is responding to illegal online gambling, advertising spillover and customer confusion. In that discussion, Dallas McCready said Atlantic Lottery was not afraid of competition but concerned about unregulated operators that draw money out of local markets.
The same logic now applies to prediction markets. Lottery corporations are less focused on whether a contract is labeled an investment, forecast or wager than on its practical effect. If consumers can risk money on the outcome of an event and receive a payout, lotteries say the activity can look and behave like gambling. That raises stakes around age controls, player protections, advertising standards, anti-money laundering oversight and the public return from gambling revenue.
The Bodog case sharpened the coalition strategy
The Canadian Lottery Coalition’s move into prediction-market lobbying follows its earlier campaign against Bodog, an offshore gambling brand that has long occupied a contentious place in Canada’s online betting landscape. The coalition has used that case to test a more aggressive approach to defending provincial gambling monopolies.
In Manitoba, the coalition backed legal action by Manitoba Liquor & Lotteries seeking to block Bodog from operating and advertising in the province. The case, filed in the Manitoba Court of King’s Bench, names Il Nido, Bodog’s operator, and Sanctum IP Holdings, the owner of Canadian trademarks. The application argues Bodog presents itself in ways that mislead customers about its legality and safety.
The litigation has advanced in stages. A court date was set after Manitoba Liquor & Lotteries secured scheduling orders, as detailed in coverage of the Manitoba injunction proceeding against Bodog. The coalition has framed the case around consumer protection and the public interest, saying profits from regulated gambling flow back to government priorities such as health care and education.
That history is relevant because prediction markets pose a different but related challenge. Bodog is framed as an illegal gambling operator. Prediction-market firms may arrive through regulated financial channels or argue that they are not gambling companies at all. For lottery corporations, that makes early intervention more important. Once a product category becomes normalized, it can be harder for provinces to regain control or require gambling-specific licenses.
U.S. developments added urgency
The Canadian debate is also being shaped by developments south of the border, where prediction markets have become a flashpoint between federal derivatives regulation and state gambling authority. U.S. operators including Kalshi have pushed event contracts into territory that increasingly resembles sports betting, prompting warnings from lottery groups and gaming regulators.
The North American Association of State and Provincial Lotteries entered the debate with unusually direct language, arguing that sports prediction contracts were an attempt to create gambling while avoiding the label. Its statement, covered in reporting on how NASPL joined the fight against prediction markets, said weak regulation could harm game integrity, consumer protection, responsible gambling programs and public-benefit funding.
That position aligns closely with Canadian lottery concerns. NASPL represents lottery organizations across North America, giving its intervention significance beyond the U.S. market. It also endorsed the World Lottery Association’s broader view that event contracts on sports, politics or other outcomes should be regulated as wagers when they function as wagers, regardless of operator branding.
For Canada, the U.S. experience is a warning. Prediction markets can expand quickly in jurisdictions where sports betting is limited or not available, creating a competitive route around state or provincial gambling rules. They also can blur the border between financial speculation and gambling in ways that make enforcement harder for agencies that were not designed to regulate both.
Major operators are watching the opening
The pressure is not coming only from startups. Large gambling and financial companies are positioning themselves in the event-contract space, signaling that prediction markets could become a significant competitive front if regulators allow broader products.
Flutter Entertainment, the parent of FanDuel, has moved to partner with CME Group on event-based derivatives. Analysts described the move as a strategic foothold that does not initially include sports contracts but could support a faster launch if the regulatory climate shifts. In coverage of Flutter’s plans, Truist Securities said the company’s entry into prediction markets was predictable given rising sports betting taxes and competition from firms such as Kalshi.
That development underscores why Canadian lottery groups are pushing now. If prediction markets remain confined to financial, economic and climate indicators, the overlap with provincial gambling may be limited. If they move into sports, entertainment or politics, they could compete directly with lottery-run sports betting and online gambling products while avoiding equivalent provincial rules.
The current dispute is therefore about more than one product category. It is a jurisdictional fight over who gets to regulate risk-based consumer markets, how gambling revenues are protected and whether financial-market labels can be used to sidestep gaming law. Canadian securities regulators have drawn an initial line. Lottery corporations now want governments to make sure that line holds before prediction markets gain deeper traction with consumers.
