AP Photo/Carlos Osorio
Canada‘s most populous province is poised to lead the way on internet gambling.
Canadian federal law delegates most forms of gambling to the provincial lotteries. There are some exceptions for charitable gambling. Conversely, a few specific types of gambling are outlawed entirely, including single-game sports wagering.
In Ontario, the government body in question is the Ontario Lottery and Gaming Corporation (OLG). In addition to selling lottery tickets, it operates dozens of land-based casinos in the province, and an online casino site.
Ontario does not offer online poker at the moment. The only provincial lottery which does is Quebec’s, with a product called OK Poker which it offers through its site Espace Jeux. A privatized online gambling market likely would attract one or more legal online poker sites, however.
More concrete action the second time around
Doug Ford was given a provincial majority government in 2018, having run on a conservative populist platform. His party first mentioned online gambling in its 2019 budget, stating that it would look at legalizing it for the private sector, and pressure the federal government to remove the prohibition on single-game sports betting.
While that first effort focused more on advocacy and consultation with stakeholders, the 2020 budget seems to promise action. The relevant portion begins as follows:
“In the 2019 Budget, the government stated its intention to establish an online market for internet gaming (iGaming) in Ontario that is both competitive and protects consumers. In continuing to work towards this goal, the Province is introducing legislation to give the Alcohol and Gaming Commission of Ontario (AGCO) authority to conduct and manage iGaming, in addition to having the role of the regulator.
If the proposed legislation is passed, a dedicated subsidiary under the AGCO would be established as the conduct and manage entity to manage the relationship between the government and private iGaming operators.”
No specifics given, but focus is on economic aspects
That legislation itself hasn’t yet materialized, as it has only been a few days since the government announced the budget. Therefore, there isn’t much to say about the specifics at this time, though it’s likely the Ford administration is taking a close look at the US approach to online gambling in Michigan, New Jersey, Pennsylvania, etc.
The framing has also changed somewhat from the first budget to the second. In 2019, online gambling came up in a subsection titled Expanding Choice and Respecting Consumers, under the vague section header Putting People First. The emphasis at that time was therefore on personal liberty.
The 2020 budget focuses largely on COVID-19 and its economic impacts. From that standpoint, online gambling is now being presented as a path to economic recovery. It falls under a subsection on Modernizing Government, within a section titled Recover: Creating the Conditions for Growth.
James Kilby, an analyst for Washington-based Vixio GamblingCompliance said that legal online gambling in Ontario would be about a $547 million market even without single-game sports betting, or $1.47 billion with it.
Meanwhile, Danielle Bush, representing the Canadian Gaming Association said that the industry expects Ontario to settle on a tax rate of around 18% to 20%. Thus, legalization should produce new tax revenue somewhere in the low hundreds of millions.
COVID has decimated Canadian gambling revenue
In Canada as well as the US, the COVID-19 pandemic has demonstrated the need for legal online gambling in jurisdictions that don’t currently have it.
Even more than other provincial lotteries, OLG has been a cash cow for the Ontario government. That’s largely because of the number of land-based casinos it operates in the province. In the 2019 fiscal year, it added some $2.3 billion to the province’s coffers.
Canada has taken a more cautious approach to COVID-19 than the US, however. Even holdout states like New Jersey allowed their casinos to reopen by July. And yet, Ontario’s remained closed until the very end of September. As a result, OLG is projecting revenue of just $200 million in 2020, less than a tenth of the usual.
Meanwhile, the province’s finance department estimated that residents spend $500 million gambling online in 2019. Assuming global trends apply equally to Canada, the numbers for 2020 could be up to twice that.
Unfortunately, relatively few of those dollars currently go to OLG. Neither Canada nor Ontario has taken a very clear stance on the legality of offshore gambling sites. Even if they did, they would have little ability to enforce the law.
As such, Canada is effectively a gray market at the moment, and most Canadians who gamble online do so with foreign operators. Not all of these are of the black market variety. Companies that operate in licensed fashion elsewhere, including the likes of PokerStars, Bet365 and 888, accept business from Canada because the authorities haven’t objected.
That being the case, there’s little reason not to begin issuing licenses to these companies and collecting taxes from them.
The political story is the reverse of the US
Astute American readers may find it odd that a Conservative provincial government is leading the charge in Canada. After all, it has generally been the case south of the border that Democrats have been pushing for gambling expansion. With some exceptions, Republicans have mostly been hesitant or in outright opposition.
The issues at play in the two countries are quite different, however. In the US, there is considerable opposition to gambling on moral grounds, largely coming from right-wing voters.
In Canada, on the other hand, it is a private sector versus public sector debate. Naturally, it is largely the Conservatives who back the idea of involving private corporations. Liberals, meanwhile would prefer to retain a government monopoly.
Interestingly, at the federal level, the left-wing New Democratic Party (NDP) backs the Conservatives on the sports betting issue, as does the separatist Bloc Québecois. Even Liberal resistance is evaporating, however. In fact, it may ultimately be under the current Liberal minority government that this barrier gets removed.
A bill to strike down the prohibition died in Parliament this fall, due to a premature end to the legislative session. Now it’s right back on the agenda, and expected to pass.
The change in stance for left-wingers has largely to do with what’s happening in the US. For Ontario in particular, the legalization of sports betting in Michigan is a big issue.
Several important casinos are close enough to the border that they fear losing business to those in Detroit, which now have full-fledged sportsbooks. It was the Member of Parliament for one of those ridings, Brian Masse for Windsor West, who made sports betting an NDP issue, and introduced one of the earlier versions of the bill.