Industry interest in prediction markets continues to grow. In August, Wealthsimple released a white paper recommending broader access to event contracts. More recently, VerdX applied to become an order-execution-only (OEO) investment dealer trading exclusively in prediction market contracts. Regulators should consider this interest carefully, but it should not determine the outcome.
The issue is not whether prediction markets are innovative, whether some investors are buying them in the U.S., or which products regulators believe should succeed. It is whether offering them through regulated investment channels is consistent with investor protection and with fair, efficient and vibrant capital markets—and whether the risks can be adequately addressed.
Supporters cite potential benefits, including forecasting and hedging. Regulators should weigh those benefits against the risks to retail investors, market integrity and the regulatory framework. Contracts tied to virtually any real-world event could require costly new systems to monitor trading, detect manipulation and address misuse of non-public information. Regulators must determine whether effective oversight is feasible, who would pay for it and whether the regulatory demands would be proportionate to these products’ role in the market.
For ordinary investors, this is not an abstract debate about regulatory classification. Products that package wagering in the language and convenience of investing could encourage short-term speculation through the same platforms Canadians use to save for retirement, education and other long-term goals. The consequences may be especially serious for investors with limited savings or little capacity to absorb losses.
Caution is not resistance to innovation. Offering gambling-like products through mainstream investment platforms could expose more Canadians to losses they are not prepared to absorb. It also raises a broader policy question: whether making short-term event speculation more accessible through investment channels could divert limited savings from investments that finance Canadian businesses, support jobs, and contribute to economic growth.
FAIR Canada’s white paper, Prediction Markets in Canada: Drawing the Regulatory Line, emphasizes that legal form is only the starting point of the discussion. Regulators must also consider how these products function in practice, the risks they create and whether the securities framework can address them effectively. Until those questions are answered, broader retail access through regulated investment channels is premature.
JP Bureaud, CEO, FAIR Canada