After banning binary options for nearly a decade, Canadian regulators have approved a new version called "event contracts." But before you start planning any Polymarket-style bets on election outcomes or assassination attempts, know that Canada's version has much tighter restrictions that prohibit anything involving politics, war, or crime.
What are event contracts, anyway?
Event contracts are binary yes/no bets on real-world outcomes that pay out $1 if you're right and $0 if you're wrong. To buy a contract, you pay somewhere between $0.01 and $0.99 based on the market’s odds of a yes outcome. Say you believe the TSX will rise above a certain level by a certain date, and the market believes there's a 70% chance of that happening, so you'd pay $0.70 for the contract. If you're right, you get $1 (netting $0.30); if you're wrong, you lose your $0.70.
Beyond speculation, event contracts can also work as hedges. For example, imagine you own a lot of gold and expect prices to drop over the next year. You don’t want to sell, so instead, you buy an event contract betting that gold will fall to a specific price or lower. If you’re right, the contract payout offsets your portfolio losses; if you’re wrong, you’ve lost your contract, but your gold is worth more than expected.
In Canada, event contracts are available through Interactive Brokers Canada, with Wealthsimple and Questrade planning to offer them later this year.Which bets qualify?
Outside Canada, one of the biggest players in this space is Polymarket, which has made headlines for allowing bets on things like the timing of a bombing strike or major political disruptions. In Canada, those kinds of bets are all prohibited. After banning binary options in 2017, regulators last month reopened the door to event contracts, but only for three specific categories: economic forecasts (inflation rates, unemployment), environmental forecasts (regional weather patterns, drought conditions), and financial indicators (the price of gold, index levels).
So while you can't bet on who will win the next election, you can bet on things like "will inflation hit 3% by the end of the year?" or "will Winnipeg get 60cm of snow in January?" Allowing bets on the environment might seem kinda weird, but they serve legitimate economic and commercial purposes. For instance, a farmer who's concerned about drought can buy a contract predicting low rainfall, hedging against a poor harvest.
What makes Canada different?
You won't be allowed to bet on things like elections, wars, or crime in Canada.
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Canadian brokerages aren't hosting event contract markets themselves – they're serving as a conduit to connect Canadian users to US markets and only offering bets that comply with Canadian regulatory restrictions. That's why all event contracts are priced in USD, and why you'll need to factor in exchange rates when trading.
There are two big Canadian-specific rules: all event contracts must have a maturity date of 30 days or more, and you must have the full cash value in your account when you buy.
The 30-day minimum exists because regulators consider shorter-term event contracts to be gambling products rather than investment products. This longer timeline reclassifies them, which has tax implications: any earnings are considered business income with a 100% inclusion rate (meaning all earnings count as taxable income, unlike capital gains where only a portion is taxed). And the no-margin requirement means your maximum loss is capped at what you paid for the contract. You can't lose more than your initial investment through leverage, though you can still lose 100% of what you put in if the bet doesn't pay out.
Canada's rules are strict, but regulators want to limit how much retail investors can lose and prevent compulsive gambling.
Prediction markets, Canadian-style
“Event contracts” sound like you can bet on anything – and in places like the US, that’s almost true. But in Canada, “anything” actually means economic indicators, commodity prices, and weather patterns. Even then, that comes with 30-day minimums and full cash upfront. It’s a boring version of the prediction markets, sure. But when everything else feels scary and unpredictable, maybe boring isn’t the worst thing right now.
