Gambling Prediction Markets in Canada: Are They Legal and Taxable?

Prediction market platforms like Polymarket and Kalshi are making it possible to bet on just about anything, from the release date of Grand Theft Auto VI to when the president of a small nation might step down. Has your group chat ever debated the outcome of a bet? Have you ever placed one? Before you do, there are some important things you should know about Polymarket and similar platforms.

Prediction markets sit somewhere between gambling and investing. Despite the buzz and heavy marketing, prediction markets are not currently legal in Canada, with very limited exceptions. Still, some Canadians are finding other ways to access these developing markets. If you're using them, it's important to understand both the legal landscape and the tax implications.

What is a prediction market?

A prediction market is a platform where people trade contracts or “shares” based on the outcome of future events in “yes or no” terms. It turns predictions into something you can buy and sell.

For example:

• Small-scale contract: “Will it rain in Vancouver tomorrow?”
• Large-scale contract: “Will Michael Cera win an Oscar this year?”

How does prediction market pricing work?

Each outcome is typically priced between $0 and $1 (or 0 to 100 cents). Similar to the TSE 300, that price is dynamic. It reflects the market's current estimate of the probability of that event happening. If a contract for “Yes” is trading at $0.65, the market is effectively saying there's a 65% chance the event will occur. If you hold the contract until it settles, then your profit or loss will be the difference between what you paid and the final outcome. You can also trade a contract before it settles, meaning your gain or loss would be the difference between the price you paid and what you sold it for.

Example of a prediction market bet

Let's say the question is whether a certain tech company will go public by the end of the year. 

You think it will, so you buy a “yes” contract (say, at $0.70).

If the company goes public by the end of the year, the contract settles at $1, and you gain $0.30.

If the company doesn't go public by the end of the year, the contract settles at $0, for a loss of $0.70 (the price you paid for the contract).

Are prediction markets legal in Canada?

The simple answer is no—at least not yet. Canadian regulators haven't created a clear framework for prediction markets, although one is likely to come soon. Now that online gambling sites such as BetMGM and FanDuel are flourishing here, sportsbooks, online gambling operators, and others are itching to get into the space. In March 2026, a new Canadian fintech announced plans to launch a pilot for the Vancouver Prediction Exchange, which aims to trade contracts related to weather, economic, or corporate data. A few other companies have received similar approval from the Canadian Investment Regulatory Organization to offer forecast contracts on a limited basis with terms of at least 30 days.

For now, if you're trading contracts, you're likely doing it through a US company such as Polymarket or Kalshi, although that can be tricky depending on where you live in Canada. In 2025, the Ontario Securities Commission effectively banned Polymarket from operating in the province for two years, citing concerns about contracts being high-risk and prone to fraud. (Ontario residents are geoblocked by Polymarket, meaning that the platform restricts order placement and prohibits the use of VPNs and similar location-hiding tools.) In other provinces, residents may still have access to the platform, but trading activity is considered illegal.

Are proceeds from prediction markets taxable?

Yes, prediction-market earnings are taxable in Canada. 

“Even if something sits in a legal grey area, tax law is separate from securities and criminal law,” says Maria Eliza Santos, a tax expert with TurboTax Canada.

Insight from Maria Eliza Santos, Tax Expert at TurboTax Canada.

The Canada Revenue Agency (CRA) requires taxpayers to report income from all sources, including illegal ones.

Your profits could be subject to:

• Capital gains tax
• Business income tax

That means:

• You should track your prediction market activity carefully.
• You may need to report gains on your tax return.
• You could owe tax even if the platform itself isn't regulated in Canada.

If you're considering not reporting income from prediction markets (especially since many prediction platforms run on cryptocurrency), one word of caution: anonymous doesn't mean invisible. 

“The CRA has increasingly sophisticated ways of tracking your finances,” says Santos. “In fact, new rules starting in 2027 will require crypto platforms to share transaction data and user identities directly with the CRA.”

Are prediction markets gambling or investing?

This is where things get a bit muddy. The CRA does not have a single, fixed label for prediction markets; instead, it classifies your activity based on your intent, frequency, and level of organization. While casual gambling is typically tax free, the structured nature of prediction markets could push them into the category of investing (capital gains) or business income.

When winnings are considered a “windfall” (like gambling)

The CRA generally considers gambling winnings to be non-taxable “windfalls.” However, this strictly applies to:

• Casual participation: Occasional bets placed for fun or entertainment.
• Lack of organization: You don't use professional tools or systematic strategies, or spend significant time researching.
• Pure chance: Prediction markets are often seen as “skill-based,” which makes this tax-free status much harder to maintain compared to a lottery.

When winnings are considered “investing” (like capital gains)

While the CRA has not issued specific guidance on prediction markets, it generally treats similar transaction-based digital assets such as cryptocurrency as commodities for tax purposes. In those cases, gains may be taxed as capital gains or business income depending on how frequently and systematically a person trades.

50% of a capital gain is taxable. Divide your capital gain by 2 and add the result to your taxable income. (Learn more about calculating capital gains.)

Conversely, any losses could be used to offset other capital gains in the same year or a future year, but not against regular income.

When winnings are considered “business income“ (like trading)

If your activity looks like a professional operation, the CRA will tax 100% of your profits as business income. The CRA uses these criteria to decide:

• Frequency: You make multiple trades per day or week.
• Holding period: You buy and sell “shares” rapidly (within minutes or hours) to profit from price fluctuations rather than waiting for the final event result.
• Knowledge: You have specialized knowledge or use sophisticated software to gain an edge.
• Intent: Your primary goal is to gain a “livelihood” rather than just a hobby.

What to track so you're not surprised at tax time

If you're using platforms like Polymarket, tracking your activity is essential. Here's what to keep records of:

• Transaction dates
• Amounts in Canadian dollars (at the time of each trade)
• Deposits and withdrawals
• Fees
• Wallet addresses (if using crypto)
• Transaction IDs
• Screenshots of trades
• Platform statements (if available)
• Details of each contract (what you bought/sold)
• Settlement outcomes

“Keeping these records will help you calculate gains and losses, support your tax filing, and offer evidence if the CRA asks questions,” says Santos.

The bottom line on prediction markets and taxes

Prediction markets feel casual. The interfaces are sleek, many of the topics are fun, and the experience sits somewhere between gambling and finance. But the money is real—and so are the tax implications.