The Canadian Securities Administrators and the Canadian Investment Regulatory Organization issued joint guidance Thursday stating that sports- and entertainment-based event contracts should not be regulated as securities or derivatives.
Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission, called the nonregulation of sports and entertainment contracts “important for investors and market participants to understand.”
“This notice provides important clarifications regarding the role and responsibility of Canadian securities regulators when it comes to certain types of event contracts,” Magidson added in a statement.
Sports betting in Canada
Canada legalized single-game sports betting in 2021, initially offered through provincial lottery corporations. That expanded to commercial, privately operated wagering in 2022 when Ontario‘s market went live.
Alberta became the second province to offer online gaming when its market launched last month.
Prediction markets offering sports contracts has muddied the waters from a regulatory standpoint. However, Canada’s stance clarifies certain contracts that won’t be regulated, unlike the U.S.
How it differs from the U.S.
The CIRO is coming out from the onset stating that sports and entertainment contracts fall outside the scope of Canadian securities and derivatives legislation entirely, which is a notably different approach than the U.S.
The distinction in the U.S. isn’t over whether sports event contracts should be regulated, but who gets to regulate them. Multiple states are entangled in litigation, with seven of them deciding that prediction markets are subject to state-level gambling laws.
Canada’s regulators avoided that turf war altogether by ruling sports and entertainment contracts out of securities law from the start, rather than staking a jurisdictional claim over them.
Current framework for authorized dealers
The press release disclosed that two CIRO dealer members are already authorized to facilitate a limited set of event contracts. However, the dealers must comply with the terms and conditions set by CIRO and CSA, which could change or be subject to further restrictions.
Anyone that is trading or facilitating a trade of an event contract that qualifies as securities or derivatives must follow existing legislation.
The regulatory status of other prediction market contracts remains under active assessment. The guidance does not blanket-cover all prediction market products, just those tied to sports and entertainment outcomes.
