Canadian financial institutions are moving quickly to restrict their employees from wagering on prediction markets, following the authorisation of these platforms by domestic regulators. Major lenders including Royal Bank of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, National Bank and Manulife have all updated internal trading policies in response to the nascent exchanges, which enable users to bet on outcomes ranging from Bank of Canada interest rate decisions to corporate earnings reports.
The regulatory approval came from the Canadian Investment Regulatory Organisation, which sanctioned two members to provide Canadians with access to event contracts: Wealthsimple, partnering with Kalshi to launch Wealthsimple Predict, and Interactive Brokers Group. Under current rules, only three categories of bets are permitted: economic forecasts, environmental forecasts and financial indicators.
Prediction markets work by allowing participants to buy shares in the outcomes of future events, with prices reflecting collective expectations. The platforms have gained traction in the United States, where operators such as Polymarket and Kalshi have attracted millions of users. However, their arrival north of the border has raised concerns among securities experts about the potential for insider trading.
A Race to Plug the Gaps
Financial institutions have long maintained personal trading policies governing how employees can manage their own investment portfolios. These policies typically target staff with access to material non-public information, including those working in investment banking, capital markets and wealth management divisions. The challenge posed by prediction markets is that they create new avenues for that information to be exploited.
RBC confirmed that employees subject to its personal trading policies are prohibited from placing bets on prediction markets. Scotiabank said its policy bars speculation on financial markets, indexes or companies through such platforms. National Bank imposed restrictions specifically on its capital markets employees, while TD Bank issued an internal reminder reinforcing how confidentiality and conduct requirements extend to prediction market activity.
Manulife adopted perhaps the most detailed approach, adding a dedicated section titled “Guidance Related to Prediction Market Activity” to its code of business conduct. The policy states that employees cannot wager if the outcome of a prediction market question relates to information they possess due to their relationship with the insurer.
Bank of Montreal and Canadian Imperial Bank of Commerce indicated their codes of conduct already address the misuse of non-public information. CIBC emphasised it continually reviews its policies to respond to evolving market conditions.
Lessons From Across the Border
The Canadian move mirrors actions taken by Wall Street institutions, where hedge funds and banks have updated their codes of conduct to restrict prediction market bets amid concerns about conflicts of interest with clients and firm reputation.
In the United States, several individuals have faced accusations of profiting from confidential information through prediction market trades. Notable cases include a Google software engineer and a U.S. Army soldier, underscoring the enforcement challenges these platforms present.
Adam Garetson, a partner at Gowling WLG who leads the firm’s blockchain and digital assets practice, said financial services companies with policies covering material non-public information should be actively evaluating how those rules apply to prediction markets.
“If you’ve got some information that allows you to get an informational advantage over other people in the market, that conduct is what these rules and laws and policies are trying to prohibit,” Garetson said. He added that implementation would vary by institution, depending on their specific risk profiles and employee bases.
Patrick Augustin, an associate professor of finance at McGill University’s Desautels Faculty of Management who holds the Canada Research Chair in Macrofinance and Derivatives, praised the banks for taking preventive action.
“They’re financial intermediaries. They channel financial flows from left to right, and that comes with information,” Augustin said. “They’re more potentially at risk of having people violating confidentiality or trading on that, and so being ahead of the curve and putting in place rules that prevent this, I think that’s positive.”
Why it Matters
The swift response from Canadian banks highlights how prediction markets have emerged as an unexpected test of existing compliance frameworks designed to prevent insider trading. As these platforms gain legitimacy through regulatory approval, they simultaneously create new vulnerabilities that firms must address. For investors and the public, the effectiveness of these new employee restrictions will determine whether prediction markets can coexist with the rigorous information controls that underpin confidence in financial markets. The stakes are considerable: a high-profile insider trading case linked to prediction markets could trigger regulatory backlash and undermine public trust in both the platforms and the institutions expected to police them.
