Canadian regulators ban brokers from offering sports and entertainment event contracts

The Canadian Investment Regulatory Organization has explicitly prohibited investment dealers from trading event contracts based on sports or entertainment. In an Oct. 16 statement, CIRO said it does not consider it appropriate to facilitate or approve applications for such contracts from its members. The regulator has updated its terms and conditions to enumerate these contracts as prohibited. This move builds on joint guidance issued with the Canadian Securities Administrators on Aug. 27.

"Further to the August 27 joint CSA and CIRO guidance, CIRO does not consider it appropriate to facilitate or approve an application by its Investment Dealer Members to trade event contracts based on sports and entertainment events or outcomes," CIRO said. "In this respect, CIRO has specifically enumerated such contracts as prohibited in the updated terms and conditions." The existing regulatory framework only permits event contracts tied to economic forecasts, environmental indicators or financial markets, with a minimum maturity period of 30 days. Contracts based on elections or other political outcomes are not allowed.

CIRO is also preventing its dealer members from presenting or promoting non-permitted contracts, such as political betting, to their clients. This is to ensure clients do not mistake these products for authorized Canadian offerings. Currently, only two CIRO members, Interactive Brokers Canada Inc. and Wealthsimple, are authorized to offer regulated event contracts. Wealthsimple's prediction market platform, Wealthsimple Predict, launched in July after receiving regulatory approval.

Despite these domestic restrictions, significant trading activity is occurring on the offshore platform Polymarket regarding the Toronto mayoral election. More than US$500,000 in volume has been recorded for the Oct. 26 vote. The trading shows a close contest, with challenger Brad Bradford at 50 percent odds and incumbent Mayor Olivia Chow at 49 percent odds. The volume does not confirm the location of participants, meaning the activity could involve foreign traders, Canadians bypassing restrictions, or a combination of both. The landscape for regulated event contracts in Canada may soon expand. A team led by former Vanguard Canada CEO Atul Tiwari has applied to CIRO for registration as an investment dealer. This group plans to launch a dedicated Canadian event contract platform called VerdX.