Good morning. Prediction market trading has taken the United States by storm. In Canada, the controversial type of wagers on real-world events has been largely off-limits until recently. Regulators now face a tough balancing act – and young investors are already betting. That’s in focus today along with the end of the fashion haul.
Up first
In the news
Telecom: The CRTC has formalized new rules for streamers to fund and promote Canadian and Indigenous content in a move that could deepen a U.S. rift.
Labour: Employers are lobbying Ottawa to introduce legislation that would make it harder for workers in federally regulated industries to go on strike.
Artificial intelligence: Shareholder groups are pushing companies to adopt more stringent oversight measures when it comes to AI liability risks.
A phone displays sports trades on Polymarket on April 16, in Portland, Ore.Jenny Kane/The Associated Press
In focus
The latest financial game
Over the past two months, I’ve spent an unreasonable amount of time thinking about whether Justin Trudeau and Katy Perry will get engaged.
Not because I particularly care (okay, maybe a little). But because on a platform called Polymarket, someone turned it into a financial trade.
Welcome to the world of prediction markets: One of the fastest growing and most controversial corners of finance right now, where users can trade on real world events.
A screenshot of a trade on the U.S.-based prediction market platform about Katy Perry and Justin Trudeau getting engaged by the end of the year.Supplied
I’m Meera Raman, a personal finance reporter at The Globe and Mail, and if you’ve talked to me at any point over the past two months, there’s a good chance I’ve brought up prediction trading. Against your will, probably.
My obsession with this topic started in March, when I broke the story that Wealthsimple had received approval to offer prediction trading in Canada. That was a pretty big deal because while prediction trading has boomed in the U.S., it’s been largely off limits in Canada.
At the time, I assumed it would be a normal business story... write it, file it, move on. Instead, I fell down the rabbit hole.
Since then, I’ve talked about prediction markets with fintech executives, regulators, skeptics, lawyers, traders, academics, tech bros and everyone in between. I’ve learned all about online contracts that let users trade on everything from interest-rate decisions to weather events to celebrity gossip.
Supporters say prediction markets can provide useful information and even help people hedge against economic uncertainty. Critics see something darker: a new form of speculative trading aimed at a generation that is already struggling with housing affordability, rising costs and economic frustration.
In Canada, only two companies have approval (Wealthsimple and Interactive Brokers Canada Inc.), and that approval comes with strict limitations. Companies can only offer contracts tied to economic indicators, financial markets and climate trends – not sports betting or election markets, which are some of the most popular contracts in the U.S.
Lawyers told me that it makes sense that regulators are starting to allow companies to offer this type of trading, because Canadians are already accessing U.S.-based platforms through virtual private networks. Meanwhile, younger traders are moving from meme stocks to crypto to prediction contracts, searching for faster gains (and maybe a little hope) in an economy in which traditional wealth building increasingly feels out of reach.
Jake Chung, 21, uses a computer and iPad to track financial markets in his apartment in Kirkland, Washington, April 14.M. Scott Brauer/The Globe and Mail
Jake Chung, a 21-year-old student in Bellevue, Wash., built an artificial intelligence model that scans sports broadcasts to help him predict, and wager on, whether certain words will be spoken during future games. Earlier this year, he placed a trade on whether the word “Jordan” would be mentioned in a sports broadcast. It was, and he made more than US$300 in seconds.
The discipline that goes into successful prediction trading is real. But so is the risk, because most people lose.
I also spoke with Nevin Burmeister, an 18-year-old in Andersonville, Ind., who said he lost more than US$2,000 on the prediction market platform Kalshi over six months, after early success convinced him that prediction trading was an easy way to make money.
Nevin Burmeister at his home in Anderson, Indiana, May 18Travis LaCoss/The Globe and Mail
“Once I got my first couple losses, instead of stopping and being responsible, I would chase them,” he told me. “I wanted my money back.”
He doesn’t use Kalshi as much these days. “I can’t really afford to do it anymore,” he said. He recently lost his job working at a bankruptcy firm and is actively looking for new work.
The result is a tricky balancing act for Canadian regulators, which must now determine how to safely introduce a fast-growing financial product at a moment when many younger investors are already embracing riskier forms of trading – and what the penalty for breaking the rules will be.
But prediction trading is already here, and its expansion in Canada feels inevitable. The question is: Are we ready?
You can read more about this topic (and thanks to our graphics team, you can even try our prediction market simulation) in this week’s Report on Business cover story.
If you want to chat about the prediction market scene in Canada, or share your trade from The Globe’s trading simulator, you can e-mail me at mraman@globeandmail.com or privately message me on Signal at MeeraWrites.99.
Charted
The power of investing early
The Globe and Mail
Financial planner (and a parent herself) Anita Bruinsma says that if you teach your kids just one financial lesson, it should be to start saving earlier in life. Meanwhile, to get some practice in, Wealthsimple is introducing kids accounts with parent-paid interest as it expands into family banking.
Quoted
Unboxing and haul content are not resonating with audiences because the ability to go buy the items boasted about is just not there.
— Sharon Lauricella, professor of communication and digital media studies at Ontario Tech University in Oshawa
When taking a closer look at the death of the “fashion haul,” it’s not just about the cost of living – it’s a shift in sentiment around mass consumption.
Up next
More files we’re following
Funds: The Loblaw bread-fixing settlement money is landing in bank accounts. We want to know: What are you spending your money on?
Cash: Xanadu strikes a deal to raise up to US$300-million as quantum stocks soar on separate U.S. funding program with strong ties to the family of President Donald Trump.
Tomorrow: We are keeping an eye on data coming for Canadian retail sales for March, and industrial product and raw materials price indexes.
Morning update
Global stocks rose and oil prices edged up, as uncertainty surrounded U.S.-Iran peace talks.
Wall Street futures were in positive territory after major North American indexes ended higher on Thursday. TSX futures pointed lower.
Overseas, the pan-European STOXX 600 was up 0.49 per cent in morning trading. Britain’s FTSE 100 rose 0.39 per cent, Germany’s DAX gained 0.56 per cent and France’s CAC 40 advanced 0.33 per cent.
In Asia, Japan’s Nikkei closed 2.68 per cent higher, while Hong Kong’s Hang Seng finished 0.86 per cent higher.
The Canadian dollar traded at 72.48 U.S. cents.