Speculation Or Security: Canada’s Evolving Regulatory Framework For Prediction Markets

On August 27, 2026, the Canadian Securities Administrators (the “CSA”) and the Canadian Investment Regulatory Organization (“CIRO”) published Joint CSA and CIRO Staff Notice 91-307 – Guidance related to Event Contracts: Compliance with Regulatory Requirements (the “Joint Notice”). The Joint Notice follows CIRO’s March 2026 bulletin on the Application of CIRO Requirements to Event Contracts (the “CIRO Bulletin”), which set out the specific terms and conditions under which CIRO’s investment dealer members (the “Dealer Members”) may offer Event Contracts (as defined below) to Canadian clients, as well as a published joint statement reminding industry participants and investors of the applicable requirements governing Event Contracts.

The Joint Notice provides important guidance on the application of securities and derivatives legislation to event contracts, prediction contracts and prediction market contracts (collectively, “Event Contracts”). Event Contracts are products whose settlement is based on the outcome of a future event and may, depending on their structure and the applicable facts and circumstances, fall within securities or derivatives legislation. Notably, the Joint Notice states that Event Contracts based on sports and entertainment events or outcomes should not be regulated within securities and derivatives legislation, and CIRO staff do not consider it appropriate to facilitate or approve an application by their Dealer Members to trade these types of Event Contracts. Further guidance on Event Contracts based on other types of events will follow.

As prediction markets such as Polymarket and Kalshi gain popularity in other jurisdictions, such as the United States, it is important for industry participants and investors to understand the more limited circumstances in which these products may currently be offered to Canadian investors. This bulletin summarizes the key regulatory requirements, including the new guidance in the Joint Notice, and considers their implications for market participants operating in or seeking to access the Canadian market.

Regulatory Background

The regulatory foundation for Event Contracts in Canada is Multilateral Instrument 91-102 Prohibition of Binary Options (“MI 91-102”) and its Companion Policy 91-102CP Prohibition of Binary Options, which came into force on December 12, 2017 in all Canadian jurisdictions except British Columbia. The British Columbia Securities Commission concurrently introduced BC Notice 2017/02 Binary Options, which separately prohibits the advertising, offering, selling or otherwise trading of binary options to retail investors in British Columbia. MI 91-102 prohibits any person from advertising, offering, selling, or otherwise trading a binary option with a term to maturity of less than 30 days to an individual.

A binary option is defined as a contract or instrument that provides for only: (a) a predetermined fixed amount if the underlying interest referenced in the contract or instrument meets one or more predetermined conditions; and (b) zero or another predetermined fixed amount if the underlying interest does not meet one or more predetermined conditions. This definition is sufficiently broad to capture many Event Contracts traded on prediction markets, the majority of which settle on an all-or-nothing basis depending on whether a specified future outcome occurs.

On April 17, 2025, the decision of the Ontario Capital Markets Tribunal in Ontario Securities Commission v. Blockratize Inc. provides an enforcement precedent for prediction market operators.¹ The Ontario Securities Commission alleged that Blockratize Inc. and its successor, Adventure One QSS Inc., violated MI 91-102 by offering binary options with maturities of less than 30 days to Ontario residents via Polymarket, a U.S.-based prediction market platform, without obtaining the required exemption. Pursuant to a negotiated settlement, in addition to a two-year restriction on participation in Ontario’s capital markets, the respondents were required to make a voluntary payment representing attributed Ontario revenue, pay an administrative penalty of $200,000 CAD, cover investigation costs of $25,000 CAD, and implement restrictions preventing Ontario residents from accessing the platform. The decision demonstrates that Canadian regulators will pursue enforcement action against prediction market operators that permit Canadian access to non-compliant Event Contracts, regardless of where the platform is based.

Two Dealer Members, specifically Interactive Brokers Canada and Wealthsimple, have been authorized to facilitate Canadian client access to certain Event Contracts, subject to certain terms and conditions imposed by CIRO. The authorization granted to the Dealer Members is limited to a specific set of Event Contracts traded and cleared through exchanges and clearing houses regulated by the U.S. Commodity Futures Trading Commission. Pursuant to Investment Dealer and Partially Consolidated Rule subsection 2246(2), any Dealer Members that wish to trade or facilitate trading in such products must provide CIRO with written notification. Importantly, while certain CIRO members may be permitted to facilitate access to Event Contracts traded on non-Canadian markets, the CSA has stated that, to date, no prediction market has itself been recognized as an exchange or registered as a dealer, or exempted from those requirements, by the CSA.

While Event Contracts may raise questions under sections 201–206 of the Criminal Code, which broadly prohibit gambling, betting, and lotteries in Canada subject to narrow exceptions (such as private bets between individuals and provincially-conducted lottery schemes), neither the Joint Notice nor the CIRO Bulletin addresses this overlap. Both instruments speak only to the application of securities and derivatives legislation to Event Contracts. They do not purport to resolve, or even comment on, how the Criminal Code’s gaming provisions apply to these products. Compliance with the CSA’s and CIRO’s requirements therefore addresses securities law obligations but does not, on its own, resolve potential exposure under the Criminal Code.

This overlap between the securities and criminal law frameworks remains an open and unsettled question, and market participants should not assume that securities law compliance forecloses scrutiny under the Criminal Code. In fact, provincial gambling regulators have begun to weigh in directly. On August 28, 2026, British Columbia’s Independent Gambling Control Office confirmed that Event Contracts based on sports or entertainment outcomes are considered gambling under British Columbia law, and must be regulated in accordance with the Criminal Code and provincial gaming legislation. Québec’s provincial gaming operator, Loto-Québec, made a similar statement. This reinforces that exposure under the Criminal Code and provincial gaming legislation remains a live and developing area of risk for market participants, separate from and in addition to securities law compliance.

Application of CIRO Requirements

The CIRO Bulletin sets out the specific terms and conditions under which the Dealer Members may offer Event Contracts to Canadian clients.

Under Appendix A of the CIRO Bulletin, the types of Event Contracts that the Dealer Members may offer are limited to:

• Economic Forecasts such as contracts based on economic statistics related to the amount of sovereign debt, inflation rates, central bank reserve rates, labour markets, and housing (for example, contracts settling on the outcome of the Bank of Canada’s interest rate announcements or on U.S. non-farm payroll figures);
• Environmental Forecasts such as contracts based on climate indicators related to the average global temperature (for example, contracts settling on the number of major Atlantic hurricanes in a given season); and
• Financial Indicators such as US 500 Forecast Contracts that settle based on the daily settlement price of the Chicago Mercantile Exchange E-Mini S&P 500 Futures (for example, contracts settling on whether the S&P 500 will close above or below a specified level on a given date).

CIRO emphasizes that certain categories of Event Contracts remain prohibited and may not be offered, traded, or facilitated by the Dealer Members, including Event Contracts based on political events, or the outcome of unlawful activities under Canadian federal, provincial, or territorial law. The Joint Notice confirms that Event Contracts based on sports or entertainment events or outcomes should not be regulated within securities and derivatives legislation. Additionally, the CIRO staff do not consider it appropriate to facilitate or approve an application by Dealer Members to trade these types of Event Contracts. The Joint Notice also cautions that facilitating trading in Event Contracts outside the permissible categories under the current terms and conditions has not been authorized by CIRO or the CSA, and that these terms and conditions may be subject to further restrictions or other changes for existing and future Dealer Members.

In addition to the contract type restrictions, CIRO has imposed limitations on the permissible maturity of Event Contracts. Specifically, dealer members may only facilitate trading in permitted Event Contracts that have a term to maturity of 30 days or longer. Dealer Members are prohibited from allowing clients to use leverage, including the use of margin accounts, for transacting in Event Contracts. This represents a meaningful restriction on the risk profile that market participants can take on through these instruments.

Implications for Market Participants

The current regulatory framework has important implications for market participants seeking to offer or facilitate access to Event Contracts in Canada:

• Regulatory Requirements Apply: Anyone trading or facilitating trading in Event Contracts that are securities or derivatives must comply with applicable requirements under Canadian securities and derivatives legislation, including applicable registration or recognition requirements. Industry participants considering offering or facilitating access to Event Contracts to Canadian investors should consider engaging with the applicable CSA member and CIRO before doing so.
• Limited Scope of Permitted Event Contracts: CIRO Dealer Members that have been authorized to facilitate trading in Event Contracts are currently limited to specified categories of contracts, including certain economic forecasts, environmental forecasts and financial indicators.
• Restrictions on Contract Terms and Trading: Authorized Dealer Members may only facilitate trading in permitted Event Contracts with a term to maturity of 30 days or longer and may not permit clients to use leverage, including margin accounts, to transact in Event Contracts.
• Certain Event Contracts Remain Prohibited: Dealer Members may not offer or facilitate Event Contracts based on elections or other political events, or on the outcome of activities that are unlawful under Canadian federal, provincial or territorial law. The Joint Notice confirms that Event Contracts based on sports or entertainment events or outcomes should not be regulated within securities and derivatives legislation.
• Enforcement Risk: Failure to comply with applicable Canadian securities and derivatives laws may result in enforcement action. As illustrated by the Ontario Securities Commission v. Blockratize Inc. decision, Canadian regulators are prepared to take enforcement action where offshore prediction market platforms make non-compliant products available to Canadian investors.
• Provincial Gambling Law and Criminal Code Overlap: Compliance with CSA and CIRO requirements governs the securities law treatment of Event Contracts but does not resolve whether such contracts also engage the gaming and betting prohibitions in the Criminal Code or applicable provincial gaming legislation. This is a distinct area of legal risk that market participants should consider separately from securities law compliance, and provincial regulators have begun to address it directly.
• Insider Trading Considerations: The potential application of Canadian insider trading and market-abuse provisions to Event Contracts is also an area that may warrant consideration, particularly where an Event Contract references information relating to a reporting issuer or other market participant. The application of these provisions will depend on the nature and structure of the Event Contract and the applicable legislation.

Implications for Investors

Canadian investors interested in accessing prediction markets should be aware of the limitations of the current regulatory framework:

• Limited Access Through Regulated Channels: At present, only two CIRO Dealer Members have been authorized to facilitate Canadian client access to Event Contracts, including contracts executed on foreign regulated prediction markets. No prediction market has itself been recognized as an exchange or registered as a dealer, or exempted from those requirements, by the CSA. Investors should verify dealer authorization with CIRO’s Dealers We Regulate page.
• Risks of Unauthorized Platforms: Investors accessing Event Contracts through platforms that are not appropriately registered, recognized or exempt from applicable Canadian regulatory requirements may not benefit from the regulatory protections associated with dealing through a CIRO-regulated Dealer Member.
• No Leverage Permitted: Investors transacting in Event Contracts through authorized Dealer Members may not use leverage, including margin accounts, to fund those transactions.
• Restrictions on Available Contracts: The Event Contracts currently available through authorized Dealer Members are limited both by subject matter and maturity. Permitted contracts must have a term to maturity of at least 30 days, and contracts based on elections or other political events and unlawful activities, as well as those based on sports or entertainment events or outcomes, may not be offered by Dealer Members.
• Evolving Regulatory Landscape: CIRO and the CSA continue to monitor developments in prediction markets and Event Contracts and have indicated that further guidance is forthcoming. Industry participants considering entering or expanding their activities in the Canadian market should monitor these developments closely.

As prediction markets continue to attract growing interest from both retail and institutional participants, industry stakeholders and investors should remain attentive to the evolving regulatory landscape and ensure full compliance with applicable Canadian securities and derivatives laws. McMillan is committed to helping clients navigate these developments and will continue to monitor regulatory guidance as it is issued by the CSA and CIRO.

Footnote

1. Ontario Securities Commission v. Blockratize Inc., 2025 ONCMT 7.