Analysis: Can Ontario Sports Betting Market Shake Off Slow First Year?

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Ontario sports betting

Commercial Ontario sports betting is a year old, but plenty of room remains to grow. 

Since the regulated commercial ON sports betting market opened April 4, 2022, the iGaming market has attracted CAD $35.6 billion (USD $26.5 billion) in wagers, according to a release from iGaming Ontario last week. Operators in the province generated CAD $1.4 billion (USD $1 billion) in revenue, but regulators do not separate iCasino and sports betting.

“Ontario’s iGaming market has displaced the pre-existing unregulated market and made Ontario a recognized leader internationally in this industry since its launch in April 2022. We are truly proud of this strong, responsible, competitive online gaming model,” Ontario Attorney General Doug Downey said in a release.

Ontario regulators might be proud about the province’s first year of online betting, but it does not stack up well against US markets with both iCasino and sports betting.

Ontario revenue trails similar US markets

While iGO touted that it is a top-five online gaming jurisdiction in North America, it still significantly trails smaller US states, including New York, which does not have legal iCasino.

The Ontario population is just less than 15 million, which would make it the fifth-largest US state. Despite the large population, its online gaming revenue trails full iGaming states like Pennsylvania, Michigan and New Jersey, all with smaller populations.

Those states also have not reported March figures, so they are missing a month compared to Ontario. Even New York sports betting surpassed the full Ontario igaming market with $1.3 billion in revenue from April 2022 to February 2023.

MarketPopulationRevenue in USD
Michigan10.0 million$1.9 billion (April ’21-Feb. ’22)
New Jersey9.3 million$2.3 billion (April ’21-Feb. ’22)
New York19.7 million$1.3 billion (April ’21-Feb. ’22, sports betting only.)
Ontario14.6 million$1.0 billion (April ’21-March ’22)
Pennsylvania13.0 million$2.2 billion (April ’21-Feb. ’22)

Expectations in Ontario

As lawmakers worked to amend the Canadian Criminal Code to allow for single-game wagering, they estimated Canadians wagered upward of CAD $14 billion annually, mainly in the gray and black market. The gray market, with operators regulated by legal jurisdictions elsewhere, had operated for decades, dating back at least to when the sovereign Mohawk Council of Kahnawáke began the Kahnawáke Gaming Commission in 1999.

The significant population size and established gaming ecosystem gave hope the province would blossom into one of the top North American online gaming markets. A PwC estimate in 2021 projected that Canadian single-game sports betting could generate between CAD $1.5 billion and CAD $2.4 billion within its first two years; that projection was nationwide and without iGaming.

Still, some sportsbooks entering the Canadian market for the first time tempered expectations.

“Due to the presence of gray-market operators, many of which have been present in Ontario for several years, we do not believe that the timing of our launch will have any impact on the share we are able to achieve in that province,” DraftKings CEO Jason Robins said in prior to launching Ontario in May 2022.

Ontario restriction stunted regulated sports betting growth

Setting up the industry framework in Ontario, regulators installed strict rules around bonuses and inducements. Multiple operators, including DraftKings and BetMGM, were saddled with fines for violating the rules.

Promotions can prove key to helping attract users to the regulated market and Ontario’s limitations likely hampered growth, particularly early on. There is likely a happy medium between Ontario’s rules and those in the US sports betting market, which regulators are beginning to rethink.

Ontario regulators release revenue figures quarterly. Before the first release in August 2022, operator executives were quiet about their first several months in the province.

Ontario sports betting by the data

The province now has more than 40 online gaming operators, many of which transitioned from the unregulated gray market that operated before legalization in 2021. The data does not include Ontario Lottery and Gaming Corp., which launched its own iCasino and sports betting product in August 2021. The OLG reported CAD $500 million (USD $370.4 million) in online gaming revenue in its last fiscal year, April 2021 to March 2022.

In Ontario’s first year of commercial sports betting, more than 1.6 million player accounts wagered in the province. The average account spent approximately CAD $70 per month.

While iGO does not separate sports betting figures, it reported basketball is the most popular sport, attracting 28% of wagers. Soccer was No. 2, drawing 15% of bets. The data also does not break down by operator, so market share is unknown.

Steady growth in Ontario sports betting

While the robust market competition has not stacked up to US sports betting figures, that could partly be because of a slow start. It took time for operators to migrate from the gray market and bettors to adapt to the new legal framework.

But a handle of CAD $14 billion in its fourth quarter of operation was a 244% increase compared to the CAD $4.1 billion in its first quarter. The fourth-quarter figures are also a 21% leap compared to the third quarter’s CAD $11.53 billion.

The CAD $514 million in revenue during its fourth quarter is a 217% increase over the CAD $162 million in the first quarter and a 12.5% bump compared to the CAD $457 million in the third quarter.

Gray-market transition a win?

Perhaps the most successful piece of Ontario is the transition of gray-market operators to the regulated market. Migrating unregulated operators into the legal market was one of the significant goals of provincial regulators.

Former gray-market operators could transition to the regulated market with their databases intact. A survey in March by the AGCO found 85% of players gambled on regulated sites. Before regulation, the AGCO estimated 70% of gambling occurred on regulated operators rather than the OLG.

“A key objective in this first year has been to move Ontario players from playing on unregulated sites to the regulated market, so that they would benefit from high standards of operator and game integrity, fairness and player protections including responsible gambling safeguards,” AGCO Registrar and CEO Tom Mungham said in a release.

“Although there’s still much work to be done, we’re pleased to see such a substantial shift towards gaming on regulated sites so far, and everything that it represents for players and for the province.”

Regulators ended a transition period Oct. 31, 2022, and more than 17 operators exited the unregulated market after the deadline. Former gray-market operators live in the province include:

Cool cool cool?

Last month, Coolbet pulled out of Ontario, and its executives recently placed part of the blame on “entrenched” operators in the province.

Dermot Smurfit, the CEO of Coolbet owner GAN, said some experts have called Ontario, “most competitive market in the world.” Coolbet will remain active in other Canada sports betting gray markets.