Are Prediction Markets Gambling?

As new financial products continue to emerge, so do the questions surrounding them. One of the most common is: “Is this investing, or is it gambling?”

Prediction markets are one of the latest products to raise that debate. Similar discussions have surrounded cryptocurrencies, stock options, sports betting, and even prize-linked savings. While these activities may appear similar at first glance, they differ in their level of risk, the role of chance, and their overall purpose. So where do we draw the line?

What are prediction markets?

Prediction markets allow people to buy and sell contracts based on the outcome of future events. These events might include elections, financial markets, economic data, sporting events, or even the weather.

If your prediction is correct, you earn money. If it’s incorrect, you lose the amount you invested.

Rather than simply guessing, many participants research data, probabilities, and current events before making decisions. Even so, the outcome is uncertain, and there is always financial risk.

What makes something gambling?

There is no single universal definition, but a simple way to identify gambling is through the 3 R’s (opens in a new tab):

• Risk: you put something of value, usually money, at stake.
• Reward: you have the chance to win something of value.
• Randomness: the outcome depends partly or entirely on chance.

All three have to be present for something to count as gambling. Many financial products also involve risk and the potential for reward, and their outcomes are often uncertain, which is why the distinction isn’t always straightforward.

How do these financial activities compare?

Here is how some of the most common financial activities line up on what you can lose, why people take part, and whether they are usually seen as gambling.

Although these activities share some similarities, they differ in what you are risking, why you are participating, and how returns are generated. Understanding these differences helps explain why some are generally considered as investments, some are considered gambling, and others fall somewhere in between.

Is prize-linked savings gambling?

Prize-linked savings are often included in this conversation because they also involve the chance to win prizes. However, there’s one key difference: your savings are never at risk.

With traditional gambling, the money you wager can be lost. If you don’t win, that money is gone.

With prize-linked savings, you earn tickets in prize draws by saving money rather than wagering it. If you win, you earn the prizes, and if you don’t, you don’t lose your savings. You simply keep the money you’ve saved.

Because your principal is never at risk, prize-linked savings apps, such as Lodavo, are generally considered savings products with prize incentives rather than forms of gambling. For the full breakdown, see is prize-linked savings gambling?

Are prediction markets legal in Canada?

In Canada, prediction markets have two very different faces, which is a good illustration of the grey area. For years, offshore markets operated in a legal gap, and regulators pushed back. The Ontario Securities Commission treats the yes-or-no contracts they sell as banned binary options, and in 2025 it reached a settlement with the operators of Polymarket (opens in a new tab) that included a two-year market ban and a $200,000 penalty.

At the same time, a narrower and fully regulated version has been given the green light. The Canadian Investment Regulatory Organization has cleared licensed investment dealers, including Interactive Brokers in 2025 and Wealthsimple in 2026, to offer “forecast” or “event” contracts that are regulated as derivatives rather than gambling. The catch is that they are limited to economic, financial market, and climate outcomes (opens in a new tab), with sports and elections left off the table.

So in Canada the same basic idea can be restricted or perfectly legal depending on who offers it and what it lets you bet on. That split is one of the clearest signs that prediction markets don’t sit neatly on either side of the line.

So, are prediction markets gambling?

Whether prediction markets are considered gambling often depends on the context, regulations, and how the product is used.

Like gambling, prediction markets involve risking money on uncertain outcomes. However, they also share characteristics with financial markets: participants often base decisions on research and probabilities, market prices reflect collective expectations, and contracts can be bought and sold before an event is resolved.

Rather than fitting neatly into a single category, prediction markets exist in a grey area between investing and gambling.

The most important question isn’t whether a product carries risk, since most financial products do. It’s how that risk is created, what drives potential returns, and whether your money is being invested, wagered, or simply saved. Understanding those differences can help you make more informed financial decisions.

If you would rather grow your money without putting it on the line, that is exactly what prize-linked savings is built for. With Lodavo, you keep every dollar in the bank account you already use and earn free tickets in a weekly cash draw just for saving. Ready to make saving more rewarding? Download Lodavo free on the Apple App Store (opens in a new tab) or Google Play Store (opens in a new tab) and start earning tickets for this week’s draw.

Terms and conditions apply. No purchase necessary (alternate method of entry available). Skill-testing question required. Open to legal residents of Canada who are the age of majority. Odds depend on the number of eligible entries received. Full rules and odds at our contest rules.