May 27, 2026
You can barely go an hour these days without the mention of prediction markets. Ads are all over network and cable programming. News companies include odds in their stories. And, inevitably, someone at your office is happily crowing about an off-kilter bet they recently won.
On the surface, it might look like an easy way to make money. But like any form of gambling — although prediction market exchanges would strenuously object to that word — the losers vastly outnumber the winners.
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An analysis by The Wall Street Journal found that 67% of profits on Polymarket, one of the leading prediction markets in the industry, go to just 0.1% of accounts. And of the 1.6 million accounts studied, more than 1.1 million were unprofitable. Over on Kalshi, another popular marketplace, there are 2.9 unprofitable users for every profitable one, according to WSJ.
For Canadians looking at these platforms with curiosity, the numbers should give serious pause — and the regulatory picture adds another layer of risk that most players don’t fully understand.
Mention markets: A cautionary tale
John Pederson knows the pain of prediction markets first-hand. While recovering from a car crash, the 33-year-old former restaurant line cook turned to Kalshi to make ends meet. He took out a variable interest loan and started betting.
He did well at first, quadrupling his money to US$8,000 (C$11,040) by betting on snowfall totals. That pot eventually jumped to US$41,000 (C$56,580) via sports bets where he used artificial intelligence to help with his predictions.
Then he decided to roll the dice on what are called “mention markets” — and bet all of his winnings on a single wager that a celebrity would say a specific word on TV. They didn’t, and he lost it all.
Mention markets are a fast-growing niche within the prediction market world, which, in January 2026, experienced US$117 million (C$161.5 million) in trading volume on Kalshi. According to WSJ, they took in just US$22,000 (C$30,360) in January 2025 — that’s a staggering increase in popularity and use in just 12 months.
That rise comes despite the fact that mention markets are easily susceptible to abuse, as insiders — such as staff or members of an audience in pre-recorded shows — might know what will be said in advance.
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Last October, Coinbase CEO Brian Armstrong cited prediction markets on the company’s earnings call and began reciting a list of words. “I just want to add here the words Bitcoin, Ethereum, Blockchain, Staking and Web3 to make sure we get those in before the end of the call,” he said. He later said he was joking and hadn’t made any bets ahead of the conference.
More recently, a soldier in the U.S. Special Forces was charged with using classified intelligence about a military mission to place a wager on Polymarket and win US$400,000 (C$552,000).
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What Canadians need to know about accessing these platforms
Most Canadians assume that if a platform is popular in the U.S., it’s fair game here. And that can be a costly assumption with prediction markets.
Kalshi is licensed by the U.S. Commodity Futures Trading Commission (CFTC) but isn’t available to Canadian residents. Polymarket, which operates on the Polygon blockchain, is technically accessible to Canadians via a crypto wallet — but it operates in a regulatory grey zone and isn’t licensed by any Canadian provincial securities regulator or the Canadian Securities Administrators (CSA). In fact, it is banned in Ontario outright.
However, Canadians who are eager to join in on the action have been gaining access to these exchanges via virtual private networks, or VPNs, which disguise their location and allow them to wager on the American markets. And this is particularly popular among young men, as the path to wealth is much faster and more exhilarating than stock or cryptocurrency trading.
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As of May 2026, no prediction market exchange holds a licence to operate in Canada. In April 2026, the CSA and CIRO jointly reminded industry and investors of the applicable requirements governing prediction markets and event contracts. The organizations clarified that anyone trading or facilitating trading in event contracts that are securities or derivatives must follow applicable requirements under securities or derivatives legislation, such as registration or recognition requirements.
ETF delays signal caution ahead
Even in the U.S., regulators are pumping the brakes. The U.S. Securities and Exchange Commission (SEC) delayed the launch of the first exchange-traded funds (ETFs) linked to prediction markets proposed by Roundhill Investments, GraniteShares and Bitwise. Regulators are requesting more information about the structure of these ETFs and want more investor disclosures.
That delay came as New York U.S. Sen. Chuck Schumer called on the White House and U.S. House of Representatives to ban government officials from betting on prediction markets — something the U.S. Senate has already done.
Canadian investors watching this space should note: If the U.S. — the world’s most permissive market for financial innovation — is hitting pause on prediction market ETFs, Canada is unlikely to move faster in licensing these products.
Read more: Here are the 3 net worth milestones that change everything for Canadians (and what they say about you)
The tax trap Canadians may not see coming
One of the most overlooked risks for Canadian prediction market participants is the tax bill.
In Canada, gambling winnings are generally not taxable — but that exemption doesn’t always apply to prediction markets. The Canada Revenue Agency (CRA) has stated that where a taxpayer bets with a “system,” a strategy or a reasonable expectation of profit, the activity may be treated as business income — and fully taxed at the individual’s marginal rate.
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That means a Canadian who uses artificial intelligence (AI) models to inform prediction market bets — as John Pederson did — could find their winnings fully taxable, even before losses are factored in. The CRA’s approach to this is still evolving, but the risk can be significant.
Anyone earning consistent income from prediction markets should speak with a tax professional and consider whether the activity qualifies as a business under CRA guidelines.
What Canadians should know before betting on prediction markets
Whether you’re drawn in by the buzz of winning big, or are just curious and want to learn more, here are practical steps before placing a single bet:
- Understand who you’re really competing against. The data is clear: The vast majority of profits flow to only a tiny number of sophisticated players. If you’re a casual participant, you are almost certainly on the losing side of those trades.
- Know your platform’s legal status. Before depositing funds, verify whether the platform is licensed to operate in Canada. Unregulated platforms offer no investor protections if something goes wrong.
- Factor in taxes before you celebrate a win. If you bet systematically — using research, models or strategy — CRA may treat your winnings as business income, not a tax-free windfall. Track every transaction.
- Never borrow to bet. John Pederson’s story illustrates this risk perfectly: He took out a variable-rate loan and lost everything. Borrowed money amplifies losses, not just gains. And using a bank loan to gamble on prediction markets could constitute a breach of contract with the lender. More critically, trading on unregistered prediction market platforms may violate Canadian securities and derivatives law — the CSA and CIRO confirmed in April 2026 that event contracts are subject to existing registration and recognition requirements, and that non-compliance may lead to enforcement action.
- Protect your core savings first. Every dollar placed on prediction markets is a dollar not growing in a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP). The tax-sheltered growth potential of registered accounts like TFSAs and RRSPs almost always outperforms speculative activity over the long run — and unlike prediction market winnings, any gains inside these accounts are never taxed.
- Watch the regulatory landscape. Canada’s treatment of prediction markets is still evolving. Platforms that are accessible today may be restricted or banned tomorrow — potentially trapping funds.
Bottom line
Prediction markets are having a moment, but the data can give anyone pause. The overwhelming majority of participants lose money and Canadians face additional risks that American users don’t: limited legal access, zero regulatory protection and a potential tax bill that could turn a winning bet into a net loss.
If you’re still curious, treat it like any other high-stakes, speculative activity. Never bet more than you can afford to lose outright, avoid borrowing to fund wagers and consult a tax professional before your winnings come with a surprise from the CRA. Most importantly, verify whether the platform you’re using is licensed to operate in Canada — because right now, none of them are.
The buzz may be real. But the odds aren’t in your favour.
— with files from Melanie Huddart
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Chris Morris is a veteran journalist with more than 35 years of experience at many of the internet's biggest news outlets. In addition to his activities as a writer, reporter and editor, Chris is also a frequent panel moderator and speaker at major conferences, including CES and South by Southwest.
