Prospective prophets profit

Investing generally involves a prophetic take on the future.

After all, investors are wagering that asset prices’ values will increase over time.

Yet prediction markets kick prognostication up several notches. These online platforms move beyond just financial assets to an assortment of world events: elections, sporting events and whether the latest blockbuster will break box office records.

At least, that is what the world’s largest prediction market platforms — Polymarket and Kalshi, both based in the United States — offer.

They allow participants to wager on a diversity of events, so long as these individuals are allowed to do so in their respective jurisdictions. Until recently, Canadians were not legally allowed to use prediction markets.

That is until Wealthsimple, one of Canada’s most innovative if not most successful fintech firms, launched the nation’s first prediction market in late July.

This is a scaled-down version compared with the U.S. platforms, a requirement of the national regulator for investment brokerages and advisers. The Canadian Investment Regulatory Organization (CIRO) gave Wealthsimple’s platform the go-ahead in March, allowing a limited array of event contracts — financial, economic and climate indicators.

As well, these contracts are traded and cleared through the U.S. Commodity Futures Trading Commission’s regulated exchanges and clearing houses, CIRO noted in an email to the Free Press.

In turn, event contracts are subject to the same regulatory oversight as options and futures.

Like these widely used derivatives, event contracts increase or decrease in value before maturity based on the likelihood of the outcome. As well, event contracts are tradable with other investors, allowing them to sell contracts at a higher price as the outcomes become more likely.

Wealthsimple’s co-founder and chief product officer Brett Huneycutt recently blogged about prediction markets’ utility, noting the similarities with options as a risk mitigation tool. An event contract for the direction of the Bank of Canada’s interest rate, for example, allows investors to hedge their exposure to rising rates.

Users can also purchase event contracts on the weather. For example, Wealthsimple’s platform had a contract in early August on whether the year’s first hurricane would be named Bertha.

The odds were 42 per cent for yes, and 58 per cent for no. Each contract is valued based on that percentage probability, expressed as a value between zero and $1. The yes-side of the Bertha contract was valued at 42 cents, and its value could rise as it becomes more likely that the year’s first hurricane would be named Bertha. If that actually occurs, individuals who bought the contract at 42 cents would receive a 58-cent profit.

Individuals can also sell a contract before the event occurs at a profit. For instance, if the yes-side of the Bertha contract increases from 42 cents to 60 cents, it could be sold for 18 cents profit.

Given their highly gambling-adjacent nature, prediction markets are controversial, and people have tried to game the system. That includes a man in charge of the TelePrompTer for U.S. President Donald Trump who allegedly bet on Kalshi about the contents of the speech.

Moreover, critics question prediction markets’ utility for building long-term wealth.

“These are not tools for wealth creation” underpinned by real assets, says Dimitri Busevs, president and chief executive officer of RBC Direct Investing. That is unlike stocks where you purchase shares in a company, becoming an owner, or lending money to a company through purchasing a bond.

Busevs recently authored a MoneySense op-ed raising concerns about prediction markets coming to Canada. Although not entirely opposed to them, he believes prediction markets should be regulated as gambling rather than investments.

While often compared with options and futures contracts, those instruments truly offer the ability to hedge risk and are under-pinned by actual assets, he says.

With prediction markets, “you’re betting on something that is ultimately going to be right or wrong.”

Still, prediction markets are growing in popularity, especially with tech-savvy individuals under age 40. One recent Pew Research study found trading volume increased from less than US$5 billion in September 2025 to $24 billion by April 2026. By comparison, total money wagered through legal sports gambling in the U.S. was $14 billion per month in 2025, it notes.

The appeal is likely the subject matter. It may seem easier to predict the outcome of an election, for example, than to determine whether to buy stock in Apple as opposed to shares in Microsoft.

And on every contract, someone will make money. Yet research shows more than 70 per cent of users lose money.

Busevs says RBC has no plans in the foreseeable future to offer prediction markets. It’s likely other large financial institutions will also sit on the sidelines.

Still, Wealthsimple has a track record of trailblazing new products that appeal to younger investors. It was among the first to offer robo- adviser portfolios, and the first to offer commission-free stock trading. It was also among the first to offer access to cryptocurrencies and recently launched no-fee, high-interest chequing accounts among other banking products.

In an email to the Free Press, Wealthsimple noted that most clients are in their mid-30s and that nearly 25 per cent of Canadians ages 18 to 40 use at least one Wealthsimple product. Although the big banks still manage the lion’s share of Canadians’ money, Wealthsimple’s market share is growing fast.

It had $17 billion in net flows in the second quarter of this year, outpacing RBC’s wealth management business in the second quarter of 2026, its email further noted.

All of this is to say that if Wealthsimple’s prediction market catches on, it would not be a surprise if RBC and others launch platforms too.

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com