How prediction market gains are taxed in Canada

The short answer

Expect to pay tax on prediction market gains. The Canada Revenue Agency (CRA) hasn’t issued guidance on event contracts, but they aren’t treated like lottery prizes or casual bets, which Canada doesn’t tax. Through a Canadian dealer they’re derivatives, and gains are generally capital gains, of which half is taxable, or business income, taxed in full, if your trading looks like a business. This page explains how to tell the difference and how to report. It’s general information, not tax advice; for your own situation, talk to an accountant.

Why prediction markets aren’t treated like gambling winnings

Canada doesn’t tax lottery winnings or casual gambling. The CRA treats them as windfalls: its folio on lottery winnings says a windfall isn’t subject to tax and that a lottery prize is neither a capital gain nor income. Only gambling that amounts to a business is taxed. In 2025 the Federal Court of Appeal held, in Fournier-Giguère, that three professional poker players’ winnings were business income.

Event contracts sit on the other side of that line, for most people. The two dealers that offer them in Canada, Interactive Brokers and Wealthsimple, do so as regulated derivatives, and Wealthsimple tells clients that its event contracts aren’t gambling or sports betting. The tax advisers who have written on this mostly agree they’re taxable:

• Wealthsimple says gains and losses are generally treated as capital gains or losses, and that the CRA, not you, decides the classification on the facts.
• Devry Smith Frank wrote in September 2026 that prediction market gains are likely to be treated as taxable investment income.
• TurboTax Canada says prediction-market earnings are taxable and that tax-free windfall status is hard to maintain.
• Rotfleisch & Samulovitch argue that an occasional, recreational user may have a case for treating small gains as non-taxable windfalls, while noting that prediction-market contracts are almost certainly not lottery schemes. Tax lawyer David Rotfleisch told The Globe and Mail in July 2026 that without legislation or case law, it’s “very much up in the air”.

Until the CRA says otherwise, the prudent course is to report your gains.

Capital gains or business income?

There’s no rule specific to event contracts, so the general test for investments applies. The CRA’s long-standing guidance on securities, archived interpretation bulletin IT-479R, which its capital gains guide still refers to, looks at a combination of factors:

• how often you trade;
• how long you hold each position;
• your knowledge of the market and the time you spend on it;
• whether you use borrowed money (not possible here, since leverage is banned).

An occasional trader who holds contracts until they settle looks like a capital investor. Someone trading daily, as a main activity, looks like a business. Intention alone doesn’t decide it, and you can’t simply pick: the election in section 39(4) of the Income Tax Act that lets you treat gains as capital applies only to “Canadian securities”, such as shares and fund units, not to derivatives.

The two-thirds inclusion rate once planned for large gains was cancelled on March 21, 2025, and Budget 2025 confirmed it, so half of a capital gain is taxable. The federal government tables Budget 2026 on November 5, 2026; we’ll update this page if it changes anything.

Reporting in Canadian dollars

Every contract is priced in US dollars, so every amount has to be converted. The CRA’s general rule is the Bank of Canada exchange rate on the day the amount arises. For capital property, convert the cost at the rate on the day you bought and the proceeds at the rate on the day you sold or the contract settled, so currency movements become part of your gain or loss.

An example, held to settlement:

If the trading were business income, the full C$83.20 would be taxed. A contract that settles at zero gives a capital loss of what you paid.

Wealthsimple’s own guidance matches: report gains and losses in Canadian dollars at the exchange rate on each transaction date. We couldn’t confirm whether either dealer issues a T5008 slip for event contracts, and Wealthsimple says to report gains whether or not you get one, so keep a record of every trade: date, contracts, price, fee and rate.

Losses

• Capital losses reduce capital gains in the same year. Net capital losses can be carried back three years or forward indefinitely, but can’t be set against your salary or other income.
• Business losses can be set against any income and carried back three years or forward 20.
• Gambling losses from recreational play aren’t deductible, one more reason not to treat event contracts as gambling for some years and investments for others.

Registered accounts and foreign property

Event contracts can’t go in a TFSA, RRSP or FHSA: Wealthsimple Predict is a separate non-registered account, and event contracts aren’t on Interactive Brokers Canada’s lists of investments allowed in registered accounts.

If the total cost of your specified foreign property tops $100,000 at any time in the year, you file Form T1135. Holding foreign property through a Canadian dealer doesn’t exempt it, though it allows simpler reporting. The CRA hasn’t said whether US-listed event contracts held through a Canadian dealer count as foreign property; if your positions are that large, ask an accountant.

What to do

1. Keep a record of every trade, with the exchange rate.
2. Decide with an accountant whether your activity is investing or a business, and report consistently from year to year.
3. Report gains even if you get no slip.
4. Check for changes after Budget 2026 on November 5, 2026.

For what a trade costs before tax, see our guide to prediction market fees in Canada.