The Ontario launch of sports betting and iGaming is slated for an April 4 launch, but whether it happens on that day is something of an open question.
There appear to be mounting efforts to challenge Canada‘s largest province’s intent to privatize two aspects of its gaming market. At the moment, the plan calls for a 20% tax rate on operators’ revenue.
Under the current model, a provincially owned corporation operates a Canada sports betting product and, at least in theory, retains all revenue for the province. The sales pitch given by the Doug Ford government is that an open market will generate greater revenue by offering consumers better products than what the province’s Proline+ product could offer.
Questions for Ontario sports betting
However, before the launch, several questions are still unanswered. Likely the biggest is whether the ON sports betting plan can survive the seemingly inevitable legal challenges.
But there are also questions about why Canada has not done more to protect Canadian sport and derivatively Canadian betting markets from match-fixing, which is not explicitly outlawed under Canada’s Criminal Code.
Then, finally, is the question of whether Ontario or any other province will successfully convert gray-market operators to the legal market and then tax them.
The potential legal challenges
The Mississaugas of Scugog Island First Nation (MSIFN) pledged to challenge the Ontario sports betting and igaming launch towards the end of January. The MSIFN’s statement called the plans “deeply flawed.”
The MSIFN has claimed that the provincial government is abdicating its obligations under Section 35 of the Canadian Constitution, which affirms and recognizes the treaty rights of Canada’s indigenous peoples.
The Great Canadian Gaming Corporation (GCGC), which operates 12 casino properties, including the Toronto-area Woodbine Racetrack, has also voiced opposition to the province’s privatization efforts. According to an article in the Toronto Star, the GCGC has estimated that the privatized iGaming market will cost the government $2.8 billion in tax revenue over five years and could result in a loss of 2,600 casino jobs.
Minor threat or out of step?
The most significant legal threat to the sports betting and iGaming launch, however, might stem from the Ontario Auditor General’s own report that expressed skepticism about whether the private market as currently constructed is even legal under the Criminal Code.
Section 207(1)(a) of the Criminal Code requires that the province must conduct and manage a gaming scheme.
In determining what constitutes conducting and managing courts, have looked at:
- responsibility for strategic decision-making;
- operational control;
- profit-sharing arrangements;
- relationship with players;
- control of funds;
- control over game selection and rules of play; and
- control over physical infrastructure and intellectual property.
Evaluating Ontario sports betting market
The Auditor-General concluded its legal evaluation of the scheme by stating:
The concept of whether a province has illegally delegated the “conduct and manage” function to a private entity has been the subject of past legal challenges in Canada. The new model for Internet gaming passes on a significant amount of business risk and strategic decision-making power to private gaming operators. As a result, iGaming Ontario’s business model could be subject to legal challenge.
The legal challenges are not the only obstacles still staring down Ontario’s launch.
What about match-fixing?
When Parliament debated whether to amend the Criminal Code to allow for single-game wagering in Canada, one frequently dismissed concern involved match-fixing.
While the regulated market is miles better than a black or gray market for detecting and preventing match-fixing, there must be some teeth that allow the government to act. Unfortunately, Canada has seen various games victimized by match-fixers.
While the Canadian Gaming Association’s Paul Burns asserted during Parliamentary testimony that he believed there were provisions that prohibited match-fixing, history tells a different story. While many countries get by without match-fixing specific laws, Canada has shown an inability to prosecute match-fixers, suggesting that they need some additional tools in order to keep sports and their betting markets safe from corruptors.
Fade to gray in Ontario sports betting?
One of the biggest desires of the privatized market in Ontario has been to recapture money that has been lost over the years to the gray market.
The Canadian Gaming Association estimated that the gray and black markets combined to see Canadians wager $14 billion annually. The low barriers to entry (a $100,000 licensing fee) will certainly see some of the operators seek to operate in the regulated market.
However, it is not certain how many companies that took wagers from Canadians will seek to enter the market. The other fact is that $14 billion estimate is composed of $4 billion wagered in the gray market and $10 billion wagered in the black market.
While these numbers are historically challenging to pinpoint, the question remains: will the regulated market be attractive enough to bring in not only the gray-market operators but the bettors who used less-regulated options in the past?
What to make of this?
The attention being paid to the launch of the sports betting market in Ontario is about to be amplified as we continue to approach the April 4 date.
It remains to be seen what legal challenges will be filed and by who, though it sounds more likely that the lawsuits are coming.
There are still a number of speed bumps that must be passed before launch.
