Why are prediction markets coming to Canada?

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This is a CBC podcast. Hi, I'm Jason Marquezau, filling in for Jamie Plassant. In the United States, prediction markets like Pauli Market and Calci allow you to bet on everything from Trump's next move, how hot it will be in Paris tomorrow, or if your

California town will get destroyed by a wildfire. but they haven't been widely available to Canadians. That's about to change. Investment company WellSimple announced earlier this month

that they'll be partnering with CalSheet to launch WellSimple Predict. It's an app that will allow Canadians to place bets on certain things,

like bank of Canada interest rates, job numbers, and long-term weather patterns. WellSimple and CalSheet are not alone. Quest trade is also seeking approval

to launch a similar product. This comes at a time when there's growing scrutiny on prediction markets, or misleading advertising and risk of insider trading.

And according to a report by our guest today, dismal chances of actually making any money. So then why are young investors, especially Gen Z, fueling the demand for prediction markets?

And what happens when companies like WellSimple lean into the gamification of the economy? I'm gonna talk about all that with Charles Martino. He's the Associate Director of Research

at the Rotman Financial Innovation Hub at the University of Toronto. Hi, Charles. Hi.

Thanks for having me. Thanks for coming on. So to start off, what do you make of the move by WealthSimple to venture into prediction markets?

Why is an investment app venturing into this kind of market wagering? When I've learned about WealthSimple now providing clients, well, the investors' approach into better prediction markets, my prize was like, I think this was actually quite bad.

But I want to have to be very careful because it's not like a very black or white situation here, there's all that more nuances. My main concern is, especially for the young people, I don't want people to stop doing that traditional investment to build long term wealth, and

then shift their, their investing towards prediction markets. That was my biggest concern with prediction market being offered to gain investors. Now, why I say that actually might not be as bad as we think it's because if

prediction markets people would argue that provides a hedge for investors, if you want to hedge some certain risk, For instance, if you want to have if you own a mortgage with a variable rates And you are afraid that the bank of Canada will increase rates next month or the couple next months

Then one could just turn on prediction market and bet on the fact that the bank of Canada might increase the rate So it can form it can provide a form of hedging to investors. I Want to talk to you about the Restrictions on the Canadian market, but first let's take a step back and can explain to me how prediction market bets or contracts work

I mean, if from what I read basically, they're not really like just straight bet on the blue Jays to break their losing streak tonight. Can you explain how they're different from like straight sports betting? Yeah, there's no bookie. So the main difference with prediction markets say versus the year classical sports gambling website that would be

drafting bet 365 scores is that there are no bookie. So prediction markets are objective. The platform is subjective is defined to match a buyer and a seller. So the platform doesn't take the counter position, right? So, and how prediction markets like to sell themselves to be very different from other sports gambling website is they will say,

well, classical sports gambling website, if you're really good better, that platform or that sports gambling website will act like a bookie will give you worse odds or might actually kick you out from the platform because if you're too good prediction market platform, that's not what they do. Their objective is to find on the buyer and start and match them. So that's

the main big difference between prediction market versus traditional sports gambling websites. So these markets have a risky reputation, but WealthSimple says they are looking out for its clients with quote, education and guardrails built in from day one. Also that they have risk reminders and warnings.

And what really sets it apart from the US versions of Calci or Pauli market is that WealthSimple predicting Canada won't allow bets on politics, sports or entertainment. In the US, you can put money on pretty much anything. Sports.

The Iran Conflict. Will Trump say Sleepy Joe this week? Even mentions whether someone will say a particular word. They would love to see a guy like that, Sleepy Joe.

But yeah. In Canada, the scope will be more limited, with regulators only approving contracts on climate, financial markets, or economic indicators. That's what WellSimple will offer through Cal-Shi.

And contracts will have to be for events occurring at least 30 days later. That means you can't start one now on what the weather will be like in Toronto tomorrow. Do you think these Canadian markets will be less risky? When I've learned the fact that sports-related questions will not be part of the platform

of prediction markets offered by WellSimple, right away I felt, okay, this is at least a good guardrail to protect against young people developing more gambling addictions. Because we know that these prediction market platform based on my research, 40% of their revenues comes from sports related questions.

And also something that's well simple as saying is that they will offer some form of sort of exam or questionnaire