Canadian regulators reject sports prediction markets in joint letter
Canadian regulators have published a joint notice rejecting sports prediction markets, indicating that they don’t consider them to qualify as securities or derivatives.
The letter was issued by the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO). The CSA is the umbrella organization for Canada’s provincial and territorial securities regulators, while CIRO is the national self-regulatory organization overseeing all investment dealers, mutual funds dealers and trading activity on Canada’s debt and equity marketplaces.
“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,” indicates the letter.
CSA Chair and Chair and CEO of the Alberta Securities Commission Stan Magidson noted in the new guidance that “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.”
Non-profit group FAIR Canada has already come out in supporting the new regulatory clarity “but remains concerned about the risks that permitted prediction market contracts may pose to retail investors.”
The group’s Executive Director JP Bureaud noted that “Canada’s capital markets are intended to support investment, capital formation, economic growth, and market efficiency,” with the group urging for more policy discussion around prediction markets as a whole.
In the regulators’ joint letter, they note that “With respect to the regulatory status of other types of event contracts not addressed in today’s guidance, assessment is ongoing.”
The letter highlights that currently, “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.”
In March, CIRO announced that Interactive Brokers Canada Inc. and Wealthbrokers Inc were the two authorized dealers, with event contracts restricted to three categories: economic forecasts, environment forecasts and financial indicators.
In an April notice, CIRO noted that “While these CIRO members may facilitate Canadian client access to event contracts, traded on non-Canadian markets, to date, no prediction market has been recognized as an exchange or registered as a dealer (or exempted from those requirements) by the CSA.”
Dig Deeper
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The Backstory
Canada draws a line around sports contracts
Canada’s securities and investment regulators have moved to separate sports prediction markets from the capital-markets framework that has enabled similar products to gain traction in the U.S. The joint notice from the Canadian Securities Administrators and the Canadian Investment Regulatory Organization is significant because it rejects a central argument made by prediction-market operators: that event contracts tied to sports outcomes can be treated as financial instruments rather than wagers.
The guidance does not close the door on all event contracts. Canadian regulators already allow limited access to certain markets tied to economic, environmental and financial indicators through authorized dealers. But by carving out sports and entertainment outcomes, they are signaling that contracts based on games, athletes or entertainment events sit outside the purpose of securities and derivatives regulation. That distinction matters because it determines who supervises the products, which consumer protections apply and whether operators can bypass gaming law by using financial-market licenses.
The Canadian position also arrives as sports prediction markets are becoming a test case for the boundary between federally regulated derivatives and state- or province-regulated gambling. In the U.S., that boundary has become increasingly contested as exchanges, sports betting companies, crypto platforms and fantasy sports operators look for ways to offer event-based trading products under federal oversight.
U.S. expansion sharpened the regulatory question
The Canadian notice follows months of activity in the U.S., where companies have used Commodity Futures Trading Commission pathways to build or explore prediction-market products. The strongest signal came from crypto exchange Kraken, which agreed to buy the CFTC-licensed Small Exchange for US$100 million. The acquisition was designed to give Kraken a federally regulated derivatives platform and a route into event-based markets, including prediction products. As reported in Kraken’s push into prediction markets through Small Exchange, the deal reflects how valuable CFTC infrastructure has become to companies seeking legitimacy in a fast-moving sector.
Kraken is not alone. Kalshi’s sports event contracts have already triggered disputes with state regulators, including in Nevada, New Jersey and Massachusetts, over whether such contracts are gambling. PrizePicks has obtained National Futures Association approval through a subsidiary, while sports betting exchange RSBIX has sought CFTC designation. These moves show that firms see federal derivatives regulation as a possible national route to products that otherwise would require state-by-state gambling approval.
Canada’s regulators appear to be responding to that same strategic tension before it becomes entrenched domestically. Their notice says sports and entertainment event contracts should not be regulated under securities and derivatives laws, while leaving assessment of other event contracts ongoing. That formulation gives regulators flexibility on economic or financial markets but removes sports from the gray zone they see developing in the U.S.
Sportsbooks prepare while trying not to provoke
Traditional betting operators are also positioning themselves. Flutter Entertainment’s partnership with CME Group placed FanDuel’s parent company near the center of the event-contract debate, even though its initial products were not sports-related. Analysts viewed the move as defensive and strategic: a way to secure infrastructure now while retaining optionality if sports contracts become more accepted. In analyst reaction to Flutter’s CME partnership, Truist Securities called the step “predictable” because upstart prediction markets were beginning to compete in sports-wagering territory.
The calculus for major sportsbooks is complicated. Companies such as FanDuel and DraftKings have spent years obtaining state licenses, building relationships with regulators and negotiating market access through casinos, tribes and leagues. A federal prediction-market product could open access to large states without legal sports betting, such as California and Texas. But it could also antagonize state regulators that oversee their core sportsbook businesses.
That tension helps explain why early offerings from established operators have centered on commodities, currencies or equity-index outcomes rather than sports. Financial event contracts fit more naturally within derivatives regulation. Sports outcomes do not. Canada’s approach reinforces the idea that established gambling operators cannot assume a financial-market wrapper will shield sports products from gaming-law scrutiny.
Leagues see integrity risks beyond licensing
The policy debate is not limited to regulator turf. Sports leagues have warned that prediction markets could create integrity risks if they expand into player performance, officiating decisions or injuries. The NBA has already raised those concerns with the CFTC, arguing that sports prediction platforms were expanding quickly and could soon offer increasingly granular basketball contracts. The league’s position, summarized in the NBA’s warning on sports prediction integrity, is that legal sports betting and sports prediction markets are not equivalent from an oversight perspective.
That distinction is important. Regulated sportsbooks typically operate under state gaming agencies with rules on integrity monitoring, suspicious wagering reports, advertising, responsible gambling and league cooperation. The CFTC’s core mandate is different: futures, swaps and derivatives markets. It does not have a dedicated sports betting division, nor the same history of supervising wagers tied to game integrity.
Canada’s regulators are effectively making a similar institutional point. Securities markets exist to support capital formation, investment, market efficiency and risk transfer. A contract on whether a team wins a game does not serve those functions in the same way as an interest-rate future or a commodity hedge. By saying sports event contracts do not belong in the securities and derivatives regime, Canadian authorities are narrowing the possibility that integrity-sensitive products migrate into a framework not designed for them.
Prediction markets remain viable outside sports
The Canadian notice should not be read as a rejection of prediction markets altogether. CIRO previously authorized Interactive Brokers Canada and Wealthbrokers to facilitate limited client access to event contracts traded on non-Canadian markets. Those products were restricted to economic forecasts, environmental forecasts and financial indicators. That carveout suggests regulators are prepared to tolerate some event-based trading where the subject matter has a clearer connection to financial markets or public-risk forecasting.
At the same time, nonprofit investor advocate FAIR Canada supported the clarity while warning that even permitted prediction contracts can pose risks to retail investors. That concern points to a broader issue: event contracts are often marketed as simple yes-or-no trades, but they can behave like speculative products, especially when offered to retail users through gamified interfaces. The investor-protection question becomes sharper when the underlying event is emotionally charged, such as a sports contest.
The industry’s growth also overlaps with wider shifts in online gaming and digital assets. Crypto-native gambling and trading firms have been experimenting with new product formats, automation and alternative licensing routes. BetHog, founded by FanDuel veterans Nigel Eccles and Rob Jones, initially pursued crypto casino gaming before pivoting toward business-to-business AI dealer technology. Its US$10 million raise to scale an AI live casino product and later decision to close its crypto casino and focus on Sentient Studios show how quickly companies in adjacent sectors are reallocating capital toward products with clearer demand or regulatory paths.
That pattern is relevant to prediction markets. Operators are testing which structures regulators will accept, where demand is strongest and how to present products as trading, gaming or technology infrastructure. Canada’s guidance changes those calculations by making clear that sports and entertainment outcomes will not be welcomed through securities or derivatives channels.
The stakes for operators and regulators
The practical effect is to place responsibility for sports prediction products closer to gambling authorities, even if the Canadian notice does not itself create a gaming framework for them. Operators hoping to import U.S.-style sports event contracts into Canada now face a less favorable route through capital-market dealers. Any future product would likely need to confront provincial gaming law, consumer-protection standards and integrity safeguards directly.
For regulators, the decision is also a preemptive defense of jurisdiction. Once trading venues, brokers and consumer platforms build products around a permissive interpretation, reversing course becomes harder. The U.S. experience shows how quickly a niche derivatives category can become a major policy fight when sports, retail speculation and national distribution converge.
Canada’s message is narrower but firm: prediction markets may have a place, but sports outcomes are not securities or derivatives in disguise. That position gives operators clarity, limits regulatory arbitrage and sets up a sharper divide with the U.S. as the North American market for event contracts develops.
