Canadian Regulators Warn Crypto Platforms against Gambling-Like Promotions

Two Canadian financial regulators have issued a warning to crypto trading platforms, citing obligations related to marketing, advertising, and social media use in the country. The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) produced a joint guidance letter on the safe uses of marketing efforts and warned against “gambling-like” promotions, schemes, or contests that may endanger consumers and prompt them into action without considering any associated risks.

False or Misleading Crypto Gambling Promotions

The regulators paid particular attention to the type of ads and marketing that “could be considered false or misleading” as they urge investors to participate in trades, exchange digital assets, but may not be realistically reflecting on the potential risk of such operations.

CSA and IIROC also reminded that its guidance applies to both crypto securities and commodities as the two terms are still related and even lack clarity in legislation. The regulators added that companies should not claim that they have been “registered under securities legislation where this is not the case.”

In the statement, the pair explained that it has noticed an increased use of marketing strategies such as contests, promotions, and bonuses as well as time limits in order to encourage investors to engage in trading quickly for a fear of missing out on a chance to turn a profit.

New Players and Established Platforms to Toe the Line

These gambling-like promotions detract from the trading element and lean more heavily on the luck of making a trade within a specified time window or by being the first among a pre-determined number of traders to carry out a transaction. The measures apply with equal strength to established companies as well as those who may be pursuant of the appropriate licenses to start training in Canada.

Advertising efforts across multiple channels will fall under these new guidelines, including marketing carried out via social media. The use of social media, the watchdogs lamented, may be preventing registered crypto platforms from keeping adequate records of their operations. To this end, CSA and IIROC recommended businesses to ensure that they have thoroughly examined the practices they use to advertise through such channels. Canada has already taken a tougher stance against crypto platforms with the Ontario Securities Commission (OSC) taking an aim at Poloniex, a crypto exchange.