LEGAL SPORTS BETTING IN CANADA - A PRELIMINARY ANALYSIS OF THE PROSPECTS FOR SINGLE-GAME WAGERING - PlayCanada
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LEGAL SPORTS BETTING IN CANADA
A PRELIMINARY ANALYSIS OF THE PROSPECTS FOR SINGLE-GAME WAGERING
Written and researched
by Eric Ramsey,
PlayCanada / Catena Media
EXECUTIVE SUMMARY PLAYCANADA PROJECTIONS
• Parliament has removed the federal ban on single-game FOR SPORTS BETTING
sports wagering in Canada, allowing provinces and territories to Maximum
regulate the industry as they see fit. This change creates a new • Handle (total wagers): $25.3 billion
frontier in the race to conquer the ever-expanding North Amer- • Revenue: $2.02 billion
ican market. • Taxes: $404 million
• If implemented with care, the total financial opportunity is Anticipated
massive. Expanded sports betting has the potential to drive • Handle: $20.6 billion
more than $2 billion in revenue to gaming operators and $400 • Revenue: $1.46 billion
million in taxes to provincial governments in Canada annually. • Taxes: $278 million
• That ceiling represents the best-case scenario in which prov- These numbers reflect expectations
inces and territories universally adopt an open, competitive for the third full year of regulated
framework. It seems likely that most jurisdictions will instead operations. Handle and revenue
offer sports betting through their provincial lottery corporations, projections are broadly based on a
allowing them to keep a proportionally larger share of a much per-capita analysis of other regulated
smaller pie. markets with comparable traits. Taxes
are forecast under a theoretical rate
• Ontario is instead going to adopt the approach that has of 20% for competitive operations and
worked the best in the U.S., opening its marketplace to competi- 50% for monopolized, lottery-operated
tion from commercial sportsbook operators and imposing a tra- products. The amount each jurisdic-
ditional tax on the proceeds. Already a hotbed for both sports tion ultimately collects will depend to
and gambling, it won’t be long before Ontario becomes one of a large extent on the specific financial
the largest regulated sports gambling markets on the continent. terms it adopts.
Overview: Canada’s
C-218 Timeline
• Feb. 25, 2020: Mem-
new sports betting law
ber Kevin Waugh of
Saskatoon introduces
C-218 into Parlia-
ment as a private bill.
Legal sports betting is coming to Canada, with the first regulated His proposal would
options set to roll out before the end of 2021. repeal the long-stand-
Parliament this year voted decisively to remove the federal ban on ing federal ban on
single-game wagering that has been present in the Criminal Code since single-game sports
the 1960s. wagering, yielding
Repeal paves the way for regulation at the provincial level, unlocking the decision to each
a new revenue stream for gambling companies and local governments provincial government
alike. Legalized sports betting could generate billions of dollars of gross individually.
proceeds and hundreds of millions in taxes and fees annually. • June 12, 2020: The
Under the previous prohibition, Canada has grown to become one five biggest profes-
of the world’s largest grey markets for online sports gambling. Foreign sional sports leagues
operators serve local customers without fear of prosecution despite in North America
having no formal authorization to operate within the country’s bor- publicly voice their
ders, while legal products from provincial lotteries are limited to support for legal-
multi-wager parlays that are largely unappealing to sharp bettors. By ized sports betting in
some estimates, Canadians wager as much as $14 billion with offshore Canada. The NFL, NHL,
and underground bookmakers every year. NBA, MLB, and MLS
According to Minister of Justice David Lametti, the new Safe and argue that legalization
Regulated Sports Betting Act (C-218) is designed to “bring a common could help rechannel
practice out of the shadows and into the open—to make it legal, regu- the unregulated off-
lated, and safe.” shore betting activity
The measure was sponsored by MP Kevin Waugh and supported by that prevails in the
a diverse group of stakeholders, picking up broad endorsements from country today.
industry trade associations, provincial governments, and nearly every • April 22, 2021: The
major professional sports league in North America. House of Commons
Lawmakers were firmly in favour too. The bill cleared both houses votes to pass the bill
of Parliament by overwhelming margins before receiving royal assent by a 303-15 margin.
on June 29. Prime Minister Justin Trudeau set an effective date for the • June 4, 2021: The bill
new law of Aug. 27. moves through Senate
committee without
amendment and onto
consideration by the
full body. Leadership
had planned to dis-
sect the language on
a clause-by-clause
basis before ultimately
advancing it with a
rubber stamp.
• June 22, 2021: After
two days of debate,
the Senate votes 57-
The Associated Press 20 to pass the bill.
Canadians will be able to wager on single CFL games in addition to • June 29, 2021: C-218
most professional sporting events around the world. receives royal assent.
Lotteries to implement sports betting in Canada It’s important to understand that C-218 BRITISH COLUMBIA does not establish a federal framework LOTTERY CORPORATION for sports betting in Canada, much as the WESTERN CANADA judicial repeal of PASPA in 2018 did not LOTTERY CORPORATION legalize sports betting throughout the ONTARIO LOTTERY AND U.S. The bill simply removes a long-stand- GAMING CORPORATION ing prohibition, reclassifying the activity LOTO-QUÉBEC as a permissible form of gambling for ATLANTIC LOTTERY provinces and territories that choose to CORPORATION regulate it within their borders. Most forms of gambling in Canada today fall under the domain of the five regional lottery corporations into which the nation is grouped. It is primarily these provincial and interprovincial agencies that will control the imple- mentation of single-game sports betting under the rules prescribed by the juris- dictions they represent. Provincial plans falling into place What about First Nations? It’s safe to assume that all these groups will add Indigenous nations are also involved in gaming in sports betting to their portfolio of games. Each al- Canada to a limited degree. Seven jurisdictions have ready offers a legal parlay betting product, and each gambling compacts with First Nations tribes, while offers online gambling in one form or another too— others operate facilities outside of the terms of the though not every option is available in every jurisdic- Criminal Code or an express provincial agreement. tion. The Mohawks of Kahnawá:ke, for instance, operate Only Ontario has so far committed to crafting an sportsbooks at their properties within the province open market for single-game wagering. The province of Quebec. was, in fact, already in the process of privatizing its That status quo will not change under the terms online gambling industry as C-218 was working its of C-218—at least not quickly. Parliament rejected way through Parliament. The Ontario Alcohol and a proposed amendment that would have expressly Gaming Commission is now building a regulatory included the First Nations, seeing the issue as too framework for sports betting in preparation for an complex to address in this otherwise simple law. anticipated late-2021 launch. Saskatchewan, however, has reportedly agreed to Lottery officials in British Columbia have meanwhile grant the Indian Gaming Authority permission to op- confirmed plans to roll out sports betting through erate retail and online betting within the province. their existing online gambling platform, PlayNow. It’s It is a small one of barely 1 million residents, making not yet clear if the BCLC will rely on its existing tech- the total opportunity rather modest. nology or form a new commercial partnership, but Reports from Ontario additionally hint at the pos- its plan to launch a sportsbook “almost immediate- sibility of tribal negotiations around sports betting ly” seems to signal the former. PlayNow also serves as part of the competitive structure regulators are Manitoba. crafting. Indications from Alberta are that sports betting is Initial implementation notwithstanding, First Na- coming directly to the PlayAlberta platform. A press tions leaders see passage of C-218 as a prerequisite release issued in May announced the regulator’s to engaging in serious dialog about the long-term plans to add sports wagering to its portfolio of gam- prospects of tribal sports betting in Canada. bling games before the end of the year, though the agency has also reached out to casino stakeholders in the province to gauge their interest in participating.
Which sports betting brands
could be coming to Canada?
One thing that could set the Canada and U.S. sports betting markets apart is the mix of sports and gambling
brands that rise to the top of the new industry. Here are some of the operators that are already part of the
conversation, with more additions likely.
There will likely be room for
participation from B2B opera-
tors and suppliers that do not
use their own brand.
TheScore Bet DraftKings/FanDuel BetMGM Provincial lotteries that seek
While its performance The fantasy sports giants The joint venture to incorporate single-game
in the U.S. has under- have dominated the first between MGM and wagering into their own
whelmed so far, no three years of expanded Entain has cemented products may choose to retain
existing sportsbook is in a sports betting in the U.S., its position as the clear
better position to succeed occupying the top two third-place brand in the existing technology partner(s)
in Canada than theScore. spots in nearly every young U.S. online as they enter the new vertical,
The Ontario-based com- state they serve. Though gambling market, the or they could open a bidding
pany, now dual-listed on they both offer DFS in result of a multi-faceted process that would allow
the Toronto and NASDAQ Canada today, the duo effort that is poised to companies like GAN, Kambi,
stock exchanges, boasts does not enjoy the same expand into Canada.
the leading mobile sports level of brand recogni- BetMGM has already and SG Digital to compete for
app in the country with tion they’ve achieved tipped its hand, in fact, access.
3.7 million monthly active in the U.S. Both will be mentioning Ontario as it Sports and telecom compa-
users. Its recent acqui- more reliant on their announced a recent new nies that are not (yet) known
sition by Penn National seemingly unlimited partnership with The for gambling are also among
Gaming and its home- marketing budgets to Hockey News and Wayne
field advantage should grow their Canadian cus- Gretzky. the potential participants.
give it the inside track on tomer base and bridge Rogers and Bell could plausi-
the local market—and the gap to the bly leverage their commercial
perhaps beyond. more-established brands. resources to inject the Sports-
net and TSN brands into the
marketplace. Fox Sports is pio-
neering one possible model in
the U.S. after lending its brand
(Fox Bet) to the sportsbook
formerly known as BetStars
Caesars PointsBet Bet365/Betway under a post-PASPA partner-
The Caesars empire Even before the change Operators currently ship with The Stars Group.
stretches all the way into in law was a guarantee, serving Canada’s Traditional media enterpris-
Canada, with its Windsor ambitious PointsBet gray-market customers es are already sizing up the
property perched just was already lining up its will likely be eligible for opportunity too.
across from Michigan operations in Canada. licenses in at least some
on a prime piece of real It is now building out a jurisdictions. That list
Torstar Media, which owns
estate along the native-Canadian team to notably includes UK- the Toronto Star and other
opposite shore of the lead its expansion to the based bet365, one of print publications, recently
Detroit River. Although north, including the ad- the largest bookmakers announced its plans to launch
its digital product has dition of former Rogers in the world. By some online casino games and
stalled in the U.S. amid executive Scott Vanderw- estimates, bet365 and
the takeover of William el as CEO. Betway together account
sports betting in Ontario.
Hill, the Caesars brand for more than half of all PostMedia also owns a
certainly has the assets sports betting web traffic number of Canadian news
required to succeed in an that originates in Canada publications and could con-
open Ontario market. today. ceivably find a path to sports
betting.
How big is the sports betting opportunity in Canada? With so many questions still unanswered at this proceeds under a patchwork structure of taxes and early stage, it’s nearly impossible to paint a complete revenue-sharing agreements. picture of the financial implications of legalized sports Much like the U.S., of course, not all jurisdictions in betting in Canada. What we can do is seek context Canada will open their markets to competition. In fact, from the young U.S. market, as individual states are it seems likely at this point that most will monopolize confronting the same obstacles and opportunities single-game wagering through their existing lottery today that await their northern neighbours in the products—a model that more closely resembles Dela- coming years. ware and Rhode Island than Nevada and New Jersey. When looking over the U.S. data, the inclusion of Even with widespread online betting, nationwide ac- online betting represents the clearest indicator of tivity could struggle to reach $5 billion annually under success for any given market. Nearly 80% of all legal this closed framework. That would yield around $500 wagers in the U.S. were placed remotely in 2020, and million in gross revenue for operators, with 11% repre- the percentage among the group of states with com- senting a typical hold under this model. Single-source petitive online betting reaches closer to 85%. In New markets tend to extract a larger percentage of each Jersey, it’s above 90%. bet from customers, as the lack of competition re- Under an idealistic hypothetical scenario in which all moves the incentive to offer attractive pricing and pro- Canadian provinces and territories authorize competi- motions. Open online markets in the U.S. by contrast tive online sports betting, operators could combine to hold a lighter 7.1% of wagers dating back to 2018. generate as much as $2.02 billion in annual revenue Reality for Canada will likely be somewhere in the on $25.3 billion in total wagers. With a 15% tax, local middle, with Ontario and perhaps one or two others governments would be in line to collect upwards of opening competitive markets while the majority of $300 million in associated taxes per year. The Canadi- provincial lottery corporations keep their industries an Gaming Association expects a rate closer to 20%, closed off. which could boost the provincial haul by another $100 Depending on the specific terms, these two distinct million without noticeably impacting the industry. models may ultimately return a comparable amount Those numbers mirror the burgeoning U.S. market of tax revenue to a given jurisdiction. Presuming the in 2020, when 19 active states plus Washington D.C. 50% share that has become typical for monopolized reported a combined USD $1.56 billion in revenue markets in the U.S., provinces and territories in Can- on $21.6 billion in total wagers. State and local gov- ada could collect the same $200-400 million in taxes ernments collected about USD $240 million of those per year under a restricted model.
Ontario’s optimistic outlook In the same way that legislative pressure from New ing. See you soon.” Jersey and Delaware catalyzed change in the U.S., Competitive online betting throughout the province Ontario’s long-suffering efforts are largely responsible will drive the industry’s success, but simple geogra- for unlocking legal sports betting in Canada. Its rep- phy will work in Ontario’s favour too. resentative members of Parliament began their push It shares a long border with Quebec, for starters, for federal liberalization a decade ago, right alongside the second most populous province and home to a the U.S. Supreme Court case initiated by former New similarly passionate base of sports fans. Nestled right Jersey Governor Chris Christie. up against the Ontario boundary, Montreal is itself With the federal prohibition now off the books, the home to more than 1.7 million of the province’s 8.6 market appears ready to turn some heads. million residents. If Ontario were a U.S. state, it would be the nation’s Detroit also lurks just acrss the river from Windsor, fifth-most populous—right between New York and a position which could become a significant asset Pennsylvania. Its 14.7 million residents represent once shore-to-shore travel returns to pre-pandemic almost 40% of Canada’s total population, and Toron- levels. The same can be said to a lesser extent regard- to’s 2.8 million inhabitants put it in competition with ing cities in upstate New York that sit near the Canadi- Chicago as the third-largest legal sports betting city an border. on the continent (behind only Mexico City and New The positive effects of geography could be further York City). Ottawa and Mississauga each add another magnified by policy and implementation decisions 1 million residents, give or take. in neighbouring provinces. If Loto-Québec rolls out Suffice it to say the opportunity is about as big is a product that is unappealing to its customers, for at gets in North America, a fact stakeholders seem to example, bettors along the border might be more appreciate. inclined to cross over to bet remotely with a large Lottery officials established a new entity called commercial sportsbook. iGaming Ontario to work on a “major sports betting Ontario is already responsible for more than half of solution” that they expect to launch before the start all regulated sports betting revenue in Canada, with of the upcoming NFL season. A spokesperson for annual proceeds of around $300 million from parlays the OLG says they will not replace the existing parlay alone. That share might even grow with the addition products but rather add “thousands more betting op- of single-game wagering, again depending on the tions” to the menu. “We will also provide new betting implementation in other provinces. choices for online and mobile customers that will also Ontario’s competitive online and retail operation include dynamic odds, novelty bets, and new features will be the nation’s largest in both absolute and like the ability to place live bets during games.” per-capita terms. Operators should ultimately com- The OLG is going to have plenty of competition, bine to book 10 figures of wagers and generate close with every major U.S. operator positioning itself for to $1 billion in total gross revenue per year. Presum- access. Score Media and Gaming, owners of theScore ing a 20% tax, the province’s share of the annual brand, even rented a parcel of prime advertising earnings could approach $200 million. space in Yonge-Dundas Square immediately following Under the current timeline, a competitive sin- the passage of C-218. Already warming up the crowd, gle-game sports betting industry will launch in Ontar- the large blue billboard reads: “Ontario, it’s happen- io before the end of 2021.
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