Internet Gaming Changes Coming to Canada

Significant changes are on the horizon for Canada and Ontario’s gaming industry. Not only did the federal government recently introduce Bill C-13 to decriminalize single-event sports betting in Canada, but the Ontario government recently reiterated and expanded upon its intention to establish a modernized online market for Internet gaming (iGaming) in the province.

Taken together, these two measures will mark a significant shift in the Canadian gaming landscape, especially with regards to online gaming.

Bill C-13 received broad support from both the gaming industry and professional sports leagues and marks the fourth attempt in Canada to remove the prohibition on single-event sports wagering. It has yet to successfully pass through the legislative process, but early indications suggest that this fourth attempt may finally bring about single event sports wagering in Canada. For more information, please see our November 2020 Blakes Bulletin: Good Odds Single-Event Sports Betting Will Soon Be Legal in Canada.

THE CURRENT FRAMEWORK

The Canadian gaming law framework is established at both the federal and provincial levels of government. At the federal level, the Criminal Code (Code) defines which gaming is legal and who can engage in it. Generally, the Code accomplishes this by broadly prohibiting gambling and gambling-related activities in Canada, subject to a few limited exceptions. One of the exceptions is for provincially conducted and managed gaming, which is the exception that the majority of legal gaming in Canada falls under.

As it stands, the Code does not have separate provisions or additional limitations for entirely digital (Internet) offerings. As long as the gaming activity in question meets the definitions for legal gaming in the Code, provincial governments are free to conduct and manage and regulate the offering either online or in-person.

Most provincial governments have now launched some form of digital gaming platform. However, these platforms are largely operated directly by provincial lottery corporations, rather than by third-party providers licensed to do so within a particular province. The extent of the available play offerings on these provincial platforms varies from province to province. Despite the availability of these legal options, a significant portion of Canadians’ online play is still conducted via offshore, unlicensed private operations. The Canadian Gaming Association estimates that Canadians spend C$4-billion annually on these “grey-market” websites for sports betting alone.

PROPOSED ONTARIO CHANGES

Ontario’s 2020 budget (2020 Budget) announced that Ontario will be introducing legislation to establish an online market for iGaming in Ontario that is competitive and protects consumers. To bring this market to life, the Ontario provincial government will introduce legislation granting the Alcohol and Gaming Commission of Ontario (AGCO) — the primary regulator for legal gaming in the province — authority to conduct and manage online gaming as well as regulate such offerings.

Importantly, the 2020 Budget notes that the AGCO will be managing the relationship between the government and private online gaming operators. While exact details have yet to be released, the 2020 Budget suggests that Ontario will be creating a framework for legalized online gaming that welcomes third-party providers.

At this stage, the biggest (as of yet unanswered) questions are:

• What will the licensing fee and/or taxation regime be?

• What will the suite of eligible product offerings be?

• Will the existing licensing model in Ontario be expanded to accommodate purely digital offerings, will new licensing categories be established, or will another alternative be introduced?

• Assuming a licensing model is unveiled, will licences be offered on a limited-number basis by way of lottery or RFP, offered to existing licensees initially in some way, or offered on an unlimited basis to anyone who satisfies the licensing criteria?

• How will responsible gaming and anti-money laundering initiatives be incorporated into the model?

• Will existing offshore operators be welcomed into Ontario with open arms or will there be any limitations placed on current “grey-market” operators?

• If Bill C-13 passes, will single-event sports betting offerings in Ontario fall under the ambit of Ontario’s new iGaming program?

The Ontario government and the AGCO will continue consulting with key stakeholders on the design of this new market for online gaming in Ontario.

Ontario, which comprises 38 per cent of Canada’s population, remains the only province that has publicly announced plans to modernize and expand its Internet gaming market. It remains to be seen whether the other provinces will follow suit with similar initiatives. We will be monitoring developments as they arise.

For further information please contact:

Bryson Stokes                          416-863-2179
John Tuzyk                                 416-863-2918
Mike Maodus                            416-863-4193

or any other member of our Gaming group.