If you have a Wealthsimple account, you might soon be able to place bets on real-world events as the phenomenon known as prediction trading gains popularity.
The Canadian investment and e-banking platform cleared a major regulatory hurdle after receiving regulatory approval from the Canadian Investment Regulatory Organization (CIRO) to offer prediction contracts to clients on its platform, a spokesperson for Wealthsimple told Global News.
But financial experts say there are questions about what easier access to the “wild west” of predictive trading would mean for users.
In some countries, people using predictive trading have also been linked to threats made against public figures when the individual’s bet did not pay off.
Prediction trading is a kind of bet you can place on real-world events. The bet is made through a contract.
“You’re the person who buys the contract and bets that the event will happen and the person that sells the contract bets that the event will not happen,” said Andreas Park, professor of finance at the University of Toronto.
These bets are typically “binary,” which essentially means that you either win the money or you don’t.
“If something happens, it gets you a dollar. If you don’t have it happen, you get zero. That’s the choice. It’s a one-zero binary option,” said Marvin Ryder, associate professor at the DeGroote School of Business at McMaster University.
In the United States, platforms like Kalshi and Polymarket offer bets on a wide range of topics from geopolitics and finance to culture, tech and elections around the world.
For example, there is a predictions market on Polymarket on who will win the Terrebonne byelection to the House of Commons in Quebec, along with a market on who will win the next season of Big Brother Brasil or which song will be number one on the Billboard Hot 100 in the spring.
“Prediction markets are actually really quite good at what we call aggregation of information, so think about it as the wisdom of the crowds,” Park said.
The regulation around these markets, however, is still evolving and catching up, Ryder said.
“This is still very much what I would describe as the wild, wild west,” he said.
In Canada, the rules limit what you can bet on.
A bulletin posted to the CIRO website said, “Certain categories of event contracts remain prohibited.”
CIRO says economic forecast trading can include “contracts based on economic statistics related to the amount of sovereign debt, inflation rates, central bank reserve rates, labor markets, and housing,” while environmental forecast trading could “contain contracts based on climate indicators related to the average global temperature.”
It added that dealers cannot offer contracts based on the outcome of elections, political events or other events of a political nature, “such as contracts predicting election results, political party leaders’ nominations or referendum results or otherwise offer event contracts based on the outcome of unlawful activities under Canadian federal, provincial or territorial law.”
“The restrictions we’ve put on it is that you can’t bet on politics and you can bet on sports. But for instance, if you wanted to bet whether there’s going to be a thunderstorm next Tuesday, you could go to Wealthsimple and you could do that,” Ryder said.
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In 2017, the Canadian Securities Administration prohibited advertising, offering, selling or trading any “binary option” – or a bet with an all-or-nothing outcome – if it had a “term to maturity of less than 30 days.”
Simply put, you can’t offer an all-or-nothing bet on something that could happen within the next 30 days.
“Those types of bets and contracts have been prohibited in Canada since 2017, so if a platform wanted to trade those types of binary yes or no bets with retail users in Canada, they would have to get exemptive relief from provincial securities regulators,” said Matthew Burgoyne, partner at financial law firm Osler, Hoskin & Harcourt, LLP.
Wealthsimple said its approval is limited to three areas only.
“We can confirm we received regulatory approval from CIRO to offer futures and forecast contracts tied to economic indicators, financial markets and climate trends,” Wealthsimple spokesperson Sheryl So said.
The regulatory approval given to Wealthsimple is similar to Interactive Brokers Canada, which currently offers “forecast trading.”
A CIRO spokesperson said they “do not comment on the regulatory status or approvals of individual firms.”
The scope of economic indicators, financial markets and climate trends covers a broad range.
For example, Interactive Brokers Canada has a bet on whether the U.S. economy will enter a recession this quarter and another on whether 2026 could be the warmest year on record.
“Will the Bank of Canada increase or decrease the interest rate? That’s something you can bet on,” Park said.
Prediction markets rose in popularity after the 2024 U.S. election, where many bet money on Donald Trump returning to the White House. Park said that in Canada, there are concerns around prediction markets influencing election outcomes.
Earlier this month, a Times of Israel reporter said he got death threats from bettors who wanted him to change his report on a missile impact in central Israel.
On March 10, Emanuel Fabian reported that a missile had landed just outside of Jerusalem. Several traders, who bet money on a Polymarket prediction market about when Iran’s strike would hit Israel, urged him to change his reporting.
What followed for Fabian was days of harassment and death threats, he said, with his paper saying it was “horrified that our military correspondent Emanuel Fabian has received death threats as a result of his work.”
Polymarket condemned the death threats and said it had banned the accounts that made threats against Fabian.
Prediction trading differs from gambling in one key respect, Park said.
“If you buy a stock, you’re also making an educated guess on whether or not the company will be doing well in the future. Where does the guess start and where does it become just holding a finger into the wind?”
The line between gambling and prediction markets is “murky,” however, Ryder said.
“You’re really buying what I’d call vapour. You don’t really own anything tangible. You just own the gamble behind it. And that is worrisome because that would attract a certain chunk of our society that doesn’t have that kind of money to lose,” he said.
Overall, however, it is better to bring these markets under regulation, Park said.
“Let’s be honest, Canadians have access to prediction markets. They can use Polymarket, which is a decentralized platform, and bet on that too,” he said.
While regulators in Canada have not allowed such prediction markets, Ryder said it can be a slippery slope.
“We’re opening a bit of a Pandora’s box here,” he said.
In most financial markets, the practice of “insider trading” is prohibited. This means the buying and selling of securities and stocks based on insider knowledge that is not public.
One major world event has raised concerns around prediction trading being vulnerable to insider trading – the Iran war.
“If people are in the know and they start betting on outcomes, that is basically not a victimless crime because somebody sells a contract and somebody else knows something will happen. They have certainty of information,” Park said.
As of Thursday, Polymarket had 259 prediction markets going on outcomes related to the U.S.-Iran war, particularly around when Trump would announce an end to military operations or when a ceasefire would be announced.
Kalshi faced backlash on its markets that allowed placing bets on the ouster of Iran’s Supreme Leader Ayatollah Ali Khamenei, sparking calls from Democratic lawmakers to outlaw wagers on military actions that could enrich officials with inside knowledge.
On Monday, Kalshi said it would block politicians and athletes from betting on their respective markets, as it aims to fend off growing scrutiny around potential insider trading.
Experts say Canadian regulations should have very clear rules around who can bet and who can’t, to prevent such concerns here.
“I would suggest that people like Mark Carney not be involved in this because as prime minister, you could affect the outcome the average person could not,” Ryder said.
While Wealthsimple has cleared a major hurdle, there is still a long way to go before they can offer these markets to any of their clients.
“It’s not like this is already live,” Park said.
Canada’s regulatory process, unlike the U.S., is fragmented. The platform may have to get further approval from the Ontario Securities Commission, he said, seeing as the company is based in Ontario.
“I want to clarify that we have not announced any product plans at this time, this is simply regulatory approval,” So said in its statement to Global News.
If you plan to put your money into prediction markets, it is important to remember the risks, Park said.
“It’s very important to understand how the payoff structure works. If the event doesn’t go your way, you lose all your money,” he said.
Ryder said he has the same advice as he would for anyone betting on sports events.
“Don’t wager more than you can afford to lose,” he said.