9 March, 2021

Paving the way

Martin Lycka, SVP of American Regulatory Affairs at Entain, speaks to Gambling Insider about the proposed legalising of online gaming in Ontario, which could pave the way for the rest of Canada to follow suit.

The Ontario provincial government has committed in its 2021 budget an announcement to establish an internet gambling market in the province, potentially paving the way to full regulation in Canada. This presents choices critical to the future path of the industry.

We strongly believe that any gambling regulation, including any in Canada and elsewhere, is most successful when it creates a robust regulatory framework based on strict but fair and reasonable product, tax, and technical and responsible gambling requirements. Our extensive experience in countries around the world has shown that regulation that achieves this is best placed to counter the risk of black market activity that may otherwise emerge.

The two key objectives of the intended Ontario regulation are to create a competitive regulatory environment while protecting consumers from any social ills associated with internet gambling, including sports betting, poker and casino products. The Alcohol and Gaming Commission of Ontario (AGCO) will be given the authority to conduct and manage internet gambling in the province while at the same time act as its regulator.

The budget announcement doesn't provide for any other details of the future regulation beyond Ontario's intention to continue engaging with the Canadian federal government to encourage legislation of single sports wagering. It is widely expected that the AGCO and the Ontario government will launch public consultations on the individual aspects of the Ontario internet gambling regulation, such as product types, taxation or technical and consumer protection requirements in January or February this year.

Canada has a rather chequered and convoluted history of gambling regulation. The individual provinces have been granted the authority to regulate gambling in their territories, with the federal government only having residual competence to deal with certain overarching regulatory aspects. Most provinces have obliged and introduced land-based casino as well as lottery legislation. The lotteries of British Columbia and Quebec have dipped their toes into the online sports betting waters; Quebec has even tried its hand at offering online poker.

At the same time, there are two factors that have inhibited more rapid regulatory developments so far: 1) no single province has yet introduced comprehensive regulation of online gambling and 2) the Canadian Federal Penal Code, in a rather antiquated fashion, prohibits single sports wagering while allowing parlay bets on three or more events. As a result, for Ontario and the other Canadian provinces to successfully regulate in the future, changes will be required on both provincial and federal level. To make things even more complex, the Canadian First Nations have a right to introduce and administer Canada-wide licensing regimes; Kahnawake has for years led the charge in this respect.

Yet, the Ontario announcement, together with recent legislative efforts on the Canadian federal level, clearly demonstrate that Canada has firmly embarked on the path towards regulating internet gambling in the foreseeable future. There have been numerous attempts in the Canadian Federal Parliament in the last decade or so to do away with the previously mentioned ban on single sports wagering. Although they have all failed, they have created momentum for a renewed push towards allowing Canadians, the proudest ice hockey nation in the world, to wager on their favourite as well as many other sports in a much less complicated way.

In November 2020, the Canadian federal government picked up what originally was a Private Member's Bill put forth by Kevin Waugh MP designed to revoke the ban on single sports wagering and converted it into a government sponsored bill. As a result, clearing the path for all types of sports betting has become a government policy, and by implication, stands a much better chance of gaining support of both Houses of the Canadian Federal Parliament. It is fair to say in this respect that the change of heart at the highest echelons of the Canadian federal government has been aided by the fact that all the Canada-facing major leagues have now thrown their weight behind full legalisation of betting, no doubt spurred on by the fast-paced regulatory developments south of the Canadian border.

The federal bill, named C-13, is quite straightforward in its wording. It will just repeal the section of the Canadian Penal that allows for no wagering but parlay wagering. All the other regulatory details will be left to the provinces, such as Ontario, to design and implement. The only exception from this rule is the federal government's decision to maintain pari-mutuel wagering on horse racing within the federal purview, without allowing single bets on horse racing. The federal legislative process is scheduled to run its course throughout 2021, with first reading of the wagering bill expected to take place in January or February.

A successful outcome of the federal legislation process, that will run throughout 2021, would mean that Ontario could extend the portfolio of products that it intends to regulate following the plan set out in its budget announcement. Permitting single sports wagering would further boost the attractiveness of the market in the biggest Canadian province with a population of 14 million, which would rank it fifth among the US states. In addition, any prospective Ontario regulation is expected to be used as a blueprint in other Canadian provinces. In particular Alberta is expected to take the plunge if and when Ontario has regulated.

Although the details of the Ontario regulation are not yet clear, the Ontario authorities have previously done their homework and consulted with a wide spectrum of operators, both domestic and foreign, on all key aspects of online gambling regulation. Advice has been sought on best practices but also crucially on matters other jurisdictions that have already regulated this space have struggled with. This trend will no doubt continue in the framework of the upcoming public consultations.

"I strongly believe that it is advisable that Ontario, and ultimately the other Canadian provinces that will have chosen to regulate online gambling, introduce reasonably strict but, at the same time, sufficiently attractive regulation because this will attract a critical mass of operators into the regulated market."

This presupposes permitting the fullest possible scope of online gambling products and legislating for a sensible tax rate as well as robust technical, responsible gambling and integrity requirements. Meeting these criteria will arguably help Canadian authorities preempt inception of a black market while ensuring a high level of consumer protection and a steady stream of tax revenue in a post-pandemic era starting in 2021.