Koho CEO rules out prediction markets as bank bid nears

Koho Financial will not offer prediction markets, chief executive Daniel Eberhard said in a podcast interview published Oct. 12, even as rival Wealthsimple rolls out a product built on the contracts and the Toronto fintech nears the end of its bid for a bank licence.

“I think that we will look back on prediction markets the same way we look back on altcoins and … NFTs,” Eberhard told The BetaKit Podcast. He argued the products “techwash” what is effectively gambling and could cause negative social effects.

Eberhard said Koho is close to finishing a five-year effort to obtain a Schedule 1 banking licence, which would turn the challenger bank into a full bank. He said the licence would let Koho offer more competitive lending and savings rates. BetaKit reported in June that Koho had not yet received the licence, and the Oct. 12 interview does not say it has arrived.

The comments set Koho apart from Wealthsimple, which is moving the other way. The Toronto company has partnered with U.S. exchange Kalshi on Wealthsimple Predict, a standalone app offering almost 4,000 markets, according to The Peak newsletter. Canadian Gaming Business reported that the Canadian Investment Regulatory Organization (CIRO) authorized Wealthsimple in March, and that only Wealthsimple and Interactive Brokers Canada are currently authorized.

The permitted menu is narrow. A March 26 CIRO bulletin allows only event contracts based on economic forecasts, environmental forecasts and financial indicators, according to Canadian Gaming Business. Political events such as elections and sports are barred, and every contract must have a settlement period of at least 30 days. CIRO and the Canadian Securities Administrators said in an April news release they would keep monitoring prediction markets and could issue further guidance or take additional action.

Outside that regulated lane, the picture is less settled. Canadian Gaming Business reported in July that Polymarket had updated its terms of use to block access in Alberta, British Columbia and Quebec, adding to an existing block in Ontario. Alberta Minister Dale Nally said at the July 13 launch of the province’s regulated iGaming market that Polymarket made the decision itself to geo-fence itself out. Polymarket did not reply to the publication’s request for comment. The Peak noted that Canadians can still reach unregulated markets on Polymarket or Kalshi with a VPN.

Koho, meanwhile, is operating from a position of strength. BetaKit reported in June that the company raised $130 million in a Series E round at a $1.33-billion post-money valuation, making it a unicorn. The company said it serves more than 2.5 million clients, up from one million in late 2023, and Eberhard put annual revenue at roughly $250 million, growing about 50 per cent a year. Questrade received a bank licence last year, BetaKit reported.

For Canadian consumers, the split highlights a choice that regulated financial apps are now making. One camp sees event contracts as an investing product when limited to economic and financial outcomes. The other, represented by Koho, treats the category as a reputational and social risk that a company seeking a bank charter does not need.

Eberhard also spoke about competition from international firms entering Canadian financial services and the absence of the Big Six banks from new payments infrastructure, according to BetaKit. Canada News Media has not independently confirmed Koho’s licence status with the company or the Office of the Superintendent of Financial Institutions, and neither Koho nor Wealthsimple has commented to us on this story.

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Sources: BetaKit (Oct. 12 interview write-up and June 11 funding report), Canadian Gaming Business (July 13), The Peak (June 19).