Event contract: An event contract is a contract tied to a specific future outcome. Participants buy or sell the contract based on whether they think that outcome will happen. If the prediction is correct, the contract pays out; if not, the contract may expire worthless.
Economic forecasts: Contracts can be tied to economic data or indicators. For example, whether inflation, interest rates, housing data, or labour market measures move above, below, or to a specific level by a future date.
Environmental forecasts: Contracts can be tied to climate or environmental indicators. For example, whether average global temperature or another defined climate measure reaches, exceeds, or stays below a specific level by a future date.
Financial indicators: Contracts can be tied to market benchmarks or financial measures. For example, whether a market index, such as the S&P 500, reaches, exceeds, or stays below a specific level by a future date.
Prediction market trading is coming to Canada, attracting high-profile attention in the news and social media. Marketed as a way to bet on the future and potentially profit from being right, they may sound simple. But beneath the buzz, they raise important questions: What behaviours do they encourage? Who benefits from these trades? And do these markets support Canadians’ long-term financial goals — or put them at risk? Here’s what Canadians should know about prediction markets before getting involved.
What are prediction markets?
Prediction markets allow participants to speculate on whether a real-world event will occur by buying and selling event contracts. In Canada, regulators have limited prediction market trading to economic forecasts, environmental forecasts, and financial indicators.
Figure 1: Prediction market example
Why are prediction markets gaining attention?
Part of the appeal of prediction markets is how they are designed to feel. They are fast-moving, interactive, and built around quick feedback. With a steady stream of new “opportunities” tied to current events, they can make trading feel engaging — almost game-like… one big reason prediction markets have gained momentum.
Novelty also plays a role. Prediction markets are new to Canada and like many new financial opportunities, can spark curiosity and FOMO. But curiosity is not a reason to invest and new doesn’t necessarily mean worth pursuing.
Are prediction markets a form of investing?
Despite some similarities in language, prediction market trading is speculation, not investing (see Figure 2). In fact, some would argue they share more in common with gambling.
Figure 2: Prediction market trading vs. long-term investing
| Prediction market trading | Long-term investing | |
| What you own | A speculative position tied to a yes/no outcome | Assets with underlying value |
| The psychology | Fast feedback, win or lose outcomes, constant engagement, endless “opportunities” | Discipline, patience, and a long-term perspective |
| Recovery potential | If held to settlement and the chosen outcome is incorrect, the position may lose its full value | Diversified portfolios can recover from market volatility and downturns and continue compounding over time |
| What it’s for | Shorter-term speculation | Longer-term wealth creation |
What risks do prediction markets pose for long-term investors?
The concern is not just the risk of losing one trade. For long-term investors, the bigger risk prediction markets pose is losing sight of their financial plan. These markets encourage quick decisions, fast feedback, and chasing short-term outcomes. Over time, that mindset can pull investors away from the structure, discipline, and patience needed to pursue long-term goals and build wealth over time.
Considering prediction market trading? Before getting involved, it’s worth pausing and asking yourself a few simple questions:
- Am I being influenced by FOMO?
- Would I still make this trade if it weren’t so easy to access?
- Does this help me build my financial future, or pull me away from it?
If any of these answers are unclear, that uncertainty may be telling you something. A Scotiabank advisor can help you answer these questions and help you look beyond the short-term appeal of prediction markets.
By the numbers
~70% of prediction market users lose money — gains concentrate among automated traders, not everyday investors.1
1% of prediction market users capture 77% of all profits.2
2017 the year Canadian securities regulators banned short term binary contracts citing concerns around fraud and potential investor harm.3 Canadian regulators have since permitted a narrow subset under strict conditions.4
What should investors focus on instead?
The reality is that investors do not need a string of correct predictions to be successful. They need a plan — and an investment solution designed to support it. Rather than depending on a single yes-or-no outcome, diversified portfolios like Scotia Essentials Portfolios are designed to help Canadians stay invested across a broad range of opportunities. Each portfolio includes a mix of asset classes, global markets, and investment styles to balance risk and reward and help grow savings over the long term.
Funds set aside for retirement, a child’s education, or other long-term goals deserve care and should be invested in alignment with an investor’s time horizon, investment objectives, and risk tolerance.
Hear from our portfolio managers
“If you have one correct prediction, that's an isolated gain — you have to do it again and again to keep winning. Even a bet with 90% odds still carries a 10% chance you lose everything. A portfolio, on the other hand, compounds on an ongoing basis. The only thing you need to be right about is your own circumstances: your time horizon, your goals. That's something you work through with an advisor, not something you have to predict.”
- Mark Fairbairn, Vice President and Portfolio Manager, Multi-Asset Management Team
To hear the full take, check out our podcast on prediction markets.
Bottom line
Prediction markets may be coming to Canada, but the fundamentals of long-term investing haven’t changed: investors still need a clear plan, a diversified portfolio aligned to their goals, and the discipline to stay focused through uncertainty.
That’s where financial advice makes the difference. An advisor can help you look beyond short-term trends, avoid distractions, and keep the focus where it belongs: on your goals, time horizon, and long-term financial future.
Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed their values change frequently, and past performance may not be repeated. This document has been prepared by Scotia Global Asset Management and is provided for information purposes only. Views expressed regarding a particular investment, economy, industry or market sector should not be considered an indication of trading intent of any of the mutual funds managed by Scotia Global Asset Management. These views are not to be relied upon as investment advice nor should they be considered a recommendation to buy or sell. These views are subject to change at any time based upon markets and other conditions, and we disclaim any responsibility to update such views. Information contained in this document, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and Scotia Global Asset Management is not responsible to update this information. Nothing in this document is or should be relied upon as a promise or representation as to the future. To the extent this document contains information or data obtained from third party sources, it is believed to be accurate and reliable as of the date of publication, but Scotia Global Asset Management does not guarantee its accuracy or reliability.
The information provided is not intended to be investment advice. Investors should consult their own professional advisor for specific investment and/or tax advice tailored to their needs when planning to implement an investment strategy to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
Scotia Global Asset Management is a business name used by 1832 Asset Management L.P., a limited partnership, the general partner of which is wholly owned by Scotiabank.
® Registered trademarks of The Bank of Nova Scotia, used under license.
© Copyright 2026 The Bank of Nova Scotia. All rights reserved.
