A former black-market sportsbook in the United States is ready to wade into the regulated Ontario sports betting market.
The Alcohol and Gaming Commission of Ontario approved globally known Pinnacle for an ON sports betting license last week. The sportsbook still needs to sign an agreement with iGaming Ontario prior to launching.
Based in Curacao, Pinnacle has operated in the Ontario gray market for decades, as well as previously in the black market in the US and UK. Now, recognizing potential competition from regulated markets, Pinnacle does appear to be embracing the regulation it long skirted in the US.
“Ontario’s sports fans and bettors deserve the best betting opportunities, and we’re excited to now service them with just that with the recent approval of our registration from the AGCO,” Pinnacle CEO Paris Smith said in a release. “There’s a robust, fair regulatory regime in place, along with a knowledgeable sports and betting audience, and we’re excited to be able to take our ‘Winners Welcome’ mantra to the market and take Ontarian betting to the next level.”
More on the history of Pinnacle
Launched in 1998, Pinnacle has grown into one of the world’s leading sportsbooks, largely operating in black and gray markets. Prior to 2006’s Unlawful Internet Gambling Enforcement Act, a large number of Pinnacle’s customers were in the US.
Pinnacle reportedly pulled out of the US sports betting following UIGEA in 2007, which dropped its revenue from $12 billion, to $5.7 billion, according to The New York Times. Despite its official stance on the US, Pinnacle was later connected to an illegal sports betting ring in a 2012 lawsuit.
The sportsbook largely built its reputation through gray-market presence across the globe, including in Canada sports betting. It staked its place in markets by offering better odds than competitors, rather than spending on introductory bonus marketing, largely because it could do so without the extra costs of operating legally.
Pinnacle plan coming together
The sportsbook operator posted a Canada country manager job earlier this year, suggesting the switch to the regulated Ontario market. Because of its long history in Ontario, Pinnacle’s customer database could already be massive and a potential boon for the regulated market.
The release said bettors can “expect the best value betting opportunities,” with North American sports as its focus. The AGCO approval is part of the company’s long-term growth plans for global growth adding to licenses in Malta, Sweden and Italy.
A switch to the regulated market in Ontario could mean Pinnacle is closer to considering re-entry into US sports betting. Whether US authorities will allow that to happen remains deeply in question, especially if the $46 million settlement paid by 5Dimes to the federal government is any indication.
Eyes on the US?
Pinnacle owner Magnus Hedman acquired UK odds supplier Jasis Group in 2020. Hedman integrated that into the launch of pricing and risk management company 10Star aimed at regulated markets.
Pinnacle thought about using Pinnacle Solutions as a B2B platform to enter the US, but 10Star has taken that focus. Neither company publicly announced US markets, but they could set a foundation in the market for a B2C entry.
Hedman took over controlling interest in Pinnacle in 2014 and has since put the company on the pathway toward more regulated markets. The Ontario regulated market could provide a keystone market before jumping back into the US.
How will Pinnacle model stack up in Ontario?
Pinnacle pitches itself on its low-margin model, promising “a better value” on each bet. The Ontario market would be the first for the sportsbook to go against US market leaders like DraftKings and FanDuel.
Those operators, however, do not appear to be dominating the Canadian province like the markets down south. Pinnacle hired a chief marketing officer in 2020 to bolster marketing efforts.
The shift will be a test of how Pinnacle’s brand strength in a regulated market. Likewise, how will a better price compare to the marketing onslaughts of US-based competitors?
Changing Ontario sports betting numbers
Last month, Ontario regulators released rather disappointing sports betting revenue figures. Regulated provincial operators took CAD$4.1 billion in iCasino wagers and sports bets during Q2, generating CAD$162 million in revenue.
Those figures came during a slow period of sports and did not include a significant number of formerly gray-market operators, which were allowed to keep their existing customer databases. The numbers also did not include Ontario Lottery and Gaming’s ProLine+.
Bet99 entering Ontario sports betting as well
Earlier this month, the AGCO approved Bet99 for an Ontario license.
Bet99 has a variety of major Canada sports betting partnerships, including Toronto Maple Leafs star Auston Matthews. The company also has deals with the Ottawa Senators and several professional teams in Quebec.
End coming to Ontario sports betting gray market?
Several major gray-market sportsbooks made the switch to the regulated Ontario market early, like bet365. The recent four operators making the switch could signify regulators are closer to their goal of closing the gray market.
BetRegal is expected to make the switchover soon as well.
Regulators were seeking comment last month in their stakeholder portal on the desired timeline for a gray market switchover. They suggest Oct. 31 as the date to begin enforcing the Ontario sports betting rules.