Why Canada shouldn’t embrace prediction markets, according to a researcher who ran one
Prediction markets promise insight into future events, but a UBC Sauder researcher who ran one explains why Canada is right to approach them with caution.
Who will win ice hockey gold at the 2026 Winter Olympics? When will Canada enter a recession?
These are the kinds of questions prediction markets aim to answer. Popular in the U.S., prediction markets allow people to trade on the likelihood of future events, from sports and politics to economic outcomes.
In Canada, however, prediction markets remain largely off-limits. Unlike the U.S., Canada regulates securities provincially through bodies such as the B.C. Securities Commission.
UBC Sauder School of Business associate professor Dr. Werner Antweiler ran a not-for-profit prediction market in Canada for over two decades. He tells us why Canada should continue with its cautious approach.
What did you learn from operating a prediction market in Canada?
We ran our markets as a research experiment focused on Canadian federal elections, with the goal of studying how people behave when money is involved. Our markets concluded in 2019, but we learned five lessons that identified the limitations and risks of prediction markets.
First, you need a large number of participants with diverse opinions. If only a few people are shaping the market, you’re not aggregating information. The entire value of a prediction market comes from aggregation.
Second, you must cap investments. Without limits, wealthier participants can dominate or manipulate outcomes. When we ran our markets, we had a $1,000 investment cap per person to ensure no one dominated our market—or not for long.
Third, binary outcomes are risky. When markets are built around simple yes-or-no bets, they behave much more like gambling. Continuous outcomes—where people trade on probabilities or ranges—generate more information and resemble conventional futures markets, like those for commodities.
Fourth, market participants shouldn’t be able to influence the event outcome or know it in advance. Elections avoid this because voters determine the result. But in sports or geopolitical events, outcomes can be influenced or known in advance, enabling insider trading and manipulation.
Lastly, most useful predictions are about events that are years into the future—think innovations, climate change, or war and peace. Predicting the near future may be more fun, but it’s less valuable to society.
How do prediction markets compare to gambling?
In practice, commercial prediction markets resemble gambling. When a market is based on a simple win-or-lose outcome, it’s essentially a bet.
One difference between betting and trading is that prediction markets allow people to change their position as new information comes in, instead of being stuck with a single bet.
Prediction markets often attract people who like taking big risks. From a public-interest point of view, the concerns are like gambling. In for-profit markets, the company running the platform makes money over time, while most users eventually lose.
How legitimate are concerns that prediction markets could influence behaviour around elections or public opinion?
Some people may use prediction markets to emotionally hedge—betting on an outcome they fear so they’re compensated if it happens.
Visibility itself can distort perception. Markets can create a sense that an outcome is inevitable, even when it isn’t, especially when amplified by media attention. That creates incentives for manipulation, particularly as the event date is approaching.
How should people interpret prediction markets’ role in public discussions?
Everyone should take information from commercial prediction markets with due caution. There is a distinct possibility that such markets could succumb to misinformation strategies and insider trading.
There are good reasons why the Canadian Securities Administrators have put a lid on “binary options” trading. Let’s call a spade a spade: Commercial prediction markets mostly offer betting disguised as trading and should be seen as a form of gaming. At least with provincial gaming monopolies, activities are tightly regulated and profits ultimately go to worthwhile causes. Canadians should remain wary of foreign prediction markets.
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Associate Professor, Strategy and Business Economics Division
