Prediction markets have a structural issue that geofencing can’t solve: someone, somewhere, usually knows how a contract will resolve before the rest of the market does. That problem was demonstrated earlier this month, when Reuters reported the CFTC was investigating a longtime White House teleprompter operator for allegedly trading on Kalshi “mention markets” – contracts that pay out based on whether a specific word or phrase gets said during a public event. Once betting extends into speeches, weather, and economic data the definition of who counts as an insider expands too: a speechwriter, a data provider, a government employee, or anyone else standing close enough to the outcome to know it before it happens can all take advantage of insider knowledge.
Canada is watching this unfold as regulators begin the rollout of our take on prediction markets. While Polymarket has been effectively shut out of Alberta, British Columbia, Ontario, and Québec, the Canadian Investment Regulatory Organization (CIRO) has only cleared a narrow, CIRO-registered path forward through dealers like Wealthsimple, in economic and financial contracts with at least 30 days to maturity. Contracts on elections, speeches, and sports are all prohibited. But as the Kalshi case shows, restricting what can be traded doesn’t answer the harder question of who should be allowed to trade it.
Polymarket’s Canadian Map Shrinks
Polymarket’s geographic-restrictions page currently identifies Alberta, British Columbia, Ontario, and Québec as blocked regions. Ontario is different from the other three provinces. As we previously discussed, Polymarket agreed to a two-year provincial prohibition after admitting that it had offered and advertised short-term binary options contrary to Ontario securities law.
The restrictions in Alberta, British Columbia and Québec appear to have been imposed by Polymarket itself, rather than through publicly announced provincial orders. When Alberta’s regulated iGaming market launched on July 13, Gaming Minister Dale Nally said Polymarket had made its own decision to geofence the province and described the development as “good news.”
As One Door Closes, A (Narrower) Door Opens
Despite Polymarket’s dwindling availability north of the 49th parallel, Canada has not rejected prediction markets outright. As we discussed in our April and May articles, CIRO has allowed two registered dealers to facilitate access to a limited class of event contracts. The permitted markets are confined to economic, financial, and environmental indicators, and must have at least 30 days to maturity.
Wealthsimple’s June announcement provides insight on how these products will be structured. Wealthsimple claims their partnership with Kalshi will allow their app, Wealthsimple Predict, to launch with nearly 4,000 contracts, but only within the Canada-permitted categories. Canadians will be able to trade a contract concerning inflation or interest rates using the Wealthsimple platform, but not one concerning an election, a sporting event, or what a politician will say during a speech.
Prompt & Circumstance
The importance of that final restriction became clear earlier this month, when Reuters reported that the CFTC was investigating a longtime White House teleprompter operator over potential insider trading on Kalshi.
The trades involved “mention markets”- contracts that resolve based on whether a word or phrase is used during a public event. Kalshi reportedly identified the activity through onboarding information and market surveillance, froze the account before more than USD $90,000 in profits were withdrawn, and referred the matter to the CFTC. No final finding of wrongdoing has been reported at this time.
The case illustrates how prediction markets expand the traditional idea of an “insider.” Valuable non-public information may be held by a speechwriter, government employee, data provider, event producer, or any other number of people who how a contract will resolve. In some cases, the trader may not merely know the outcome but may also be able to influence it.
Kalshi said in June that it would require employment disclosures for users trading sensitive contracts and introduce a whistleblower portal. Wealthsimple has also said that Kalshi maintains market surveillance and that Wealthsimple will monitor, detect and report potential insider-trading activity.
A Growing Problem
The teleprompter investigation is not an isolated case. In April, U.S. prosecutors and the CFTC charged an Army Special Forces member with allegedly using classified information about a planned operation to capture former Venezuelan president Nicolás Maduro to trade related Polymarket contracts. Prosecutors allege that he invested approximately USD $33,000 and earned nearly USD $410,000. The allegations have not yet been proven in court.
That same month, Kalshi suspended three U.S. congressional candidates for what it described as “political insider trading”. Each candidate had traded contracts connected to their own election, including one who admitted placing a USD $100 bet on himself and another who apologized for betting USD $50 on his own primary race.
In June, Reuters reported that U.S. authorities were also investigating former congressman George Santos. Kalshi reportedly flagged trades placed against Santos attending the State of the Union after he had publicly suggested that he would be there. His account was frozen and the matter was referred to the CFTC and the Department of Justice. No charges or findings of wrongdoing had been announced at the time of the report.
Taken together, the cases show how prediction-market insiders may include military personnel, political candidates, public officials and employees with advance knowledge of an event. They also show that the relevant advantage may arise not only from confidential information, but from a trader’s ability to influence the event being traded.
Narrower Contracts, Similar Risks
Canada’s restrictions will help limit the risk of insider trading on prediction market platforms, to a degree. The 30-day minimum makes rapid mention markets unavailable through CIRO-authorized dealers, while the prohibition on political events removes contracts based on elections and government speeches.
However, the permitted categories are not immune from informational advantages. Government employees may receive economic statistics before publication, central-bank or departmental personnel may know the contents of an announcement, and corporate employees or data providers may possess information affecting financial-indicator contracts. Even weather and climate contracts may depend on data that certain people can access before the wider public. For instance, France’s gambling regulator recently ordered internet service providers to block Polymarket and raised concerns that inside information may have been used in weather-related wagering, demonstrating that even “neutral” forecast markets can still create integrity risks.
What Canadian Regulators Still Need to Decide
CIRO’s current conditions focus primarily on contract categories, maturity, and leverage. The published guidelines do not provide a detailed prediction-market-specific rulebook defining who is an insider or when someone must refrain from trading a particular event.
Future Canadian guidance will need to address these practical questions. Should users disclose their employer or government role? Must dealers prevent people connected to a settlement source from trading? How should suspicious activity be shared between a Canadian dealer and a foreign exchange? What happens when a trader can influence the outcome? When may an account be frozen, a trade cancelled, or a profit withheld? For now, these questions remain unanswered. The Canadian Securities Administrators and CIRO have already said that they intend to issue further guidance and will consider whether additional regulatory action is required. The recent developments suggest that those rules will need to address more than which contracts may appear on a platform.
Canada’s prediction-market debate seems to be moving beyond the initial question of whether these products should be regulated as investments or as bets. The emerging system must regulate where markets are available, what Canadians may trade, and who must stay out when they already know what happens next. While geofencing and product restrictions can prevent the more obvious violations, unfortunately, neither can guarantee a completely fair market.
