You can now legally bet on whether Dollarama or Loblaw will beat earnings. Experts say Canada's insider-trading laws weren't built for this

It feels like a natural extension of investing: Putting money on numbers you already track. But securities lawyers say the format hides a real risk. Some of the people you’re betting against may already know the answer.

Why these bets aren’t like a sports parlay

A sportsbook doesn’t usually have to worry that a player knows the final score in advance. A market betting on Air Canada’s quarterly numbers is a different story. “These would be very attractive bets for someone who might have that information ahead of time,” Gregory Hogan, a partner in the capital markets group at Cassels Brock & Blackwell LLP, told The Globe and Mail.

That’s because prediction markets are shrouded in legal ambiguity. Canada’s insider-trading rules were written for people trading shares of a company, not for wagers on a data point that a company will later disclose. “The insider-trading laws in Canada were built for a different world. They weren’t built for prediction markets,” noted Adam Garetson, a partner at Gowling WLG who leads the firm’s blockchain and digital assets group.

Could someone use inside information to win?

South of the border, where these markets have existed longer, the cautionary tales are already well-publicized. In May, a Google software engineer was accused of profiting more than US$1.2 million (C$1.65 million) by trading on confidential business information through Polymarket, an American prediction market similar to Wealthsimple Predict. A separate case involved an American soldier accused of using classified intelligence to bet on a U.S. military operation, netting more than US$400,000 (C$550,000).

This legal grey zone is real, but it isn’t a free pass. Evan Thomas, a Toronto-based lawyer who specializes in advising fintech clients, told The Globe and Mail that regulators have a broad public-interest power that could apply even if the insider-trading rules technically don’t. “I would expect that a Canadian securities regulator... would say that’s activity contrary to the public interest,” he said.

What banks and watchdogs are doing about it

Some of Canada’s biggest banks are already tightening the rules for their own staff, according to reporting from The Globe. Royal Bank of Canada bars employees who handle material non-public information from placing bets on prediction markets, a policy communicated through an internal bulletin. Bank of Nova Scotia’s trading policy prohibits staff from using these platforms to speculate on markets, indexes or companies. Additionally, Bank of Montreal says its code of conduct covers the use of non-public information as it relates to the bank and its clients.

The Canadian Investment Regulatory Organization says dealers offering prediction markets must have controls in place to catch improper trading, and would examine those controls if a concern surfaced. The Canadian Securities Administrators, the umbrella group for provincial regulators, says these contracts can count as securities, derivatives or both, and anyone trading them is still bound by rules against insider trading and market manipulation. Wealthsimple, for its part, says three layers of surveillance, including monitoring from its exchange partner Kalshi, are meant to catch misuse.

Before you place a bet, know this

For now, Canadian regulators don’t allow wagers on political or entertainment outcomes, only economic and corporate data points. That narrows the field, but it doesn’t remove the information gap. A Canadian Tire employee, a supplier or even a well-connected analyst could have a better read on comparable-sales trends than the retail bettor on the other side of the contract.

A few things worth doing before you fund one of these accounts:

• Treat it as speculation, not investing — the payout structure resembles a bet, not ownership, and carries none of the protections that come with holding shares
• Assume some counterparties know more than you do, and price that into how much you’re willing to risk
• Check what’s actually being wagered on — corporate and economic data points carry a different risk profile than a coin-flip market
• Watch for updated bank and employer policies, since several large institutions have only recently started addressing this directly

If you want exposure to how Dollarama or Air Canada perform, buying shares or a broad Canadian equity fund still comes with disclosure rules, oversight and decades of enforcement history behind it. Prediction markets don’t have that track record yet — and until they do, the safest approach is to treat any money you put on them as money you’re fully prepared to lose.