Canada Financial Regulators Not In Support of Sports Event Contracts

• Two Canadian regulatory associations declare sports event contracts as outside scope of regulatory framework
• The associations reports event contracts based on sports and entertainment should not be regulated within securities and derivatives legislation
• Remind anyone trading event contracts in Canada must follow applicable requirements under legislation

The Canadian Securities Administrators and Canadian Investment Regulatory Organization have made their opinions on sports and entertainment prediction market event contracts quite clear, which may prove to be good news for Alberta and Ontario regulated sports betting markets.

The Canadian Securities Administrators (CSA) and Canadian Investment Regulatory Organization (CIRO) issued a joint statement declaring event contracts based on sports and entertainment events or outcomes should not be regulated within securities and derivatives legislation and not appropriate to trade these types of event contracts.

“CSA staff’s view is that Event Contracts based on sports and entertainment events or outcomes should not be regulated within securities and derivatives legislation. CIRO staff do not consider it appropriate to facilitate or approve an application by their dealer members to trade these types of event contracts,” the two reported in the joint statement.

Ongoing Evaluation of Event Contracts

The two associations noted that certain event contracts may fall “within the broad definitions of securities or derivatives under securities and derivatives legislation,” but certain contracts are “outside the scope of that framework.”

Currently, the CSA and CIRO reported members may one facilities trading of a limited set of event contracts traded and cleared through certain U.S. regulated exchanges, namely those based on economic, environmental, or financial indicators.

“Facilitating trading in Event Contracts outside the permissible categories under these terms and conditions has not been authorized by CIRO or the CSA. In addition, we continue to review these terms and conditions, which may be subject to further restrictions or other changes for these dealer members and any others in the future,” the CSA and CIRO reported in the joint statement.

Good News For Sports Betting?

Canada’s hesitancy to accept event contracts based on sports or entertainment event outcomes is likely good news for its relatively young regulated sports betting markets.

While the U.S. is currently embroiled in several lawsuit related to the regulatory oversight of sports event contracts, Canada regulators seem to be in agreement that the event contracts fall outside of the country’s regulatory framework.

This likely will continue to funnel those interested in sports betting to one of Canada’s two regulated sports betting markets in either Alberta or Ontario.

The Alberta Gaming, Liquor, & Cannabis Commission ushered in the province’s regulated online sports betting and iGaming market in July. For years, PlayAlberta was the only legal Alberta sports betting app and regulated iGaming site in the province, it is not necessarily the only operator currently in the province. However, operators offered gaming in Alberta as part of the gray market, where they offered games to Canadian sports bettors and customers but provided the Alberta government with no tax revenues.

The newly launched regulated Alberta sports betting market is loosely based on Ontario’s legalization model. It allows for multiple private-sector operators to do business in Alberta, allowing those operating in the gray market to license themselves in the province. It also establishes the Alberta iGaming Corporation to regulate, license, and oversee the operations of iGaming.

The Alcohol and Gaming Commission of Ontario launched its own regulated market in April 2022.

Provincial lotteries offerrrf single-game online sports betting since late 2021. The Ontario Lottery and Gaming Corporation (OLG), the Atlantic Lottery Corporation (ALC), and the British Columbia Lottery Corporation (BCLC) have all launched their own online sports betting services.

However, these lottery online sports betting books did not offer the same odds or spreads as private sportsbooks.