Murray Wood: Who's hot... and who's not
Every Friday, Murray Wood takes a look back at the week's news and decides who's hot... and who's not. This week's list ...
TORONTO — Wealthsimple’s newest product has given armchair economists and Canadians convinced they can predict Mother Nature a chance to put their skills to the test, but some say the business is likely after an even bigger audience.
The Toronto-based financial services company started offering prediction markets last month. The product lets customers make wagers of $1 or less on the outcome of economic, financial or climate matters like what will happen at the Bank of Canada’s next interest rate announcement or how many major Atlantic hurricanes there will be this year.
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But the first few weeks have some thinking Wealthsimple might have even bigger ambitions.
When Charles Martineau, an associate professor of finance at the University of Toronto, and Marius Zoican, the Canada Research Chair in financial technology, each logged onto Wealthsimple’s Predict app, they found it displaying stakes in who will become the next James Bond, what the score will be at future football games and who will win the 2028 U.S. presidential election.
Canadian users can’t put money on any of those topics because the country’s regulators have yet to allow prediction market trading on entertainment, sports or politics, and topics can only be offered if their outcome is at least 30 days away from being determined.
Clicking on any of the subjects revealed a note from Wealthsimple offering to notify the user if trading becomes available.
“I think the message here is that prediction markets are here to stay, and though there are some temporary blackouts, don’t worry that the contracts you can trade on are quite boring because we are working on overcoming these barriers and making everything available in the future,” Zoican said.
He and Martineau think displaying topics users can’t trade on is a sign that the company is trying to gauge whether there’s enough consumer interest in broadening its nascent prediction market offerings.
“They’ll try and get as much data as they can to then go back to regulators and try to make a push,” Martineau predicted.
“And that’s fair for them because if my objective was to grow Wealthsimple, that’s what I would do.”
Asked whether that’s the plan, Wealthsimple spokesperson Victoria Belton said in an email that the prediction market product is still in the very early stages and “for now” the company is focused on the markets it currently offers. It makes others available in a view-only mode, so clients can follow along, she said.
However, she also shared a whitepaper the company released recently outlining how Wealthsimple envisions regulations around prediction markets, including sports contracts, could work in Canada.
The Canadian Investment Regulatory Organization, a national body regulating investment dealers, doesn’t allow prediction market trading on entertainment, sports and politics.
Asked why it limits prediction trading to economic and climate forecasts as well as financial indicators, CIRO spokesperson Kate Morris offered no explanation but said her employer continues to monitor market developments to determine whether further regulation is required.
She declined to comment on whether Wealthsimple was flouting regulations by featuring contracts people can’t trade on in Canada through its app.
Ilana Kelemen, a spokesperson for fellow regulator, the Canadian Securities Administrators, also wouldn’t comment on the matter, but said, “Canadians should avoid using platforms or trading through dealers that do not comply with Canadian securities laws, and are not registered with or recognized by a Canadian securities regulator as they present significant risks to customers because investors’ assets may not be adequately safeguarded.”
Securities regulators in many countries aren’t on board with sports, entertainment and politics prediction markets because they think they’re risky, vulnerable to insider trading and better off overseen by gambling bodies, Zoican said.
South of the border, trading on Canada’s banned topics isn’t just allowed; it’s in full swing.
When combined with cryptocurrency, the Pew Research Centre suggests that sports and politics made up 91 per cent of the global trading volume between July 2024 and this past May on Kalshi, a platform Wealthsimple partnered with for its prediction market product.
Over the same span, the topics made up 90 per cent of prediction market investments on Polymarket, a platform banned in Ontario over securities regulations.
“Sports, more celebrity-related events, political events, that’s the bread and butter of the prediction markets, of Kalshi, of Polymarket. That’s where most of the volume is,” Zoican said. “So it makes sense that Wealthsimple would want to have a piece of that pie.”
Offering expanded prediction market trading wouldn’t just be a play to collect fees on every wager.
It’s also a way for Wealthsimple, a growing financial services company which is increasingly becoming a challenger to Canada’s major banks, to cultivate new clients for products that involve investments well beyond $1.
“Maybe they’ll say, look we’re not going to make any money out of this, but we can just grab some people through prediction markets and then eventually try to convert them to our Wealthsimple,” Martineau said.
“Maybe it is another way of marketing to try to grow their base and then try to turn them into real investors through Wealthsimple.”
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