Ontario's Online Gaming Liberalization - Looking into the Crystal Ball - COVER STORY - IMGL
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COVER STORY
BY RON SEGEV
Ontario’s Online
Gaming
Liberalization
Looking into the Crystal B
COVER STORY
e
Ball The 2019 Ontario budget, released
in April of 2019 by the Progressive
Conservative government, was
noteworthy for a variety of reasons.
Those in the iGaming industry
immediately zoned in on one
segment which lamented the
fact that Ontarians are currently
spending $500-million per year
mostly on grey-market websites for
online gaming.
FALL/WINTER 2019 | 5COVER STORY
Consequently, the budget states that the with which companies in the U.K. can variation of it, stands a strong chance of
government wants to ensure that “the operate in this space, the government has being adopted by the OLG.
people of Ontario have access to safe and a highly active enforcement body and a
legal gambling options” and that they targeted regulatory framework to ensure Likelihood of a Liberalized Ontario
plan to do that by the establishment of a safe gaming and intended to protect the iGaming Regime?
“competitive market for online gambling public interest.2 The U.K. has stringent The U.K. and Denmark are just two
that will reflect consumer choice while advertising standards through the possible models that Ontario can draw
protecting consumers who play on these Advertising Standards Association (ASA) inspiration from and the industry is mature
websites”.1 that limit where iGaming ads can be placed enough now so that the OLG and AGCO
and to whom they can be targeted. will not have to re-invent the wheel to get
The Ontario Monopoly Ontario may also emulate the Danish a liberalized framework rolling. But how
The vow to create a competitive market hybrid iGaming model. In preparing this will it drive this initiative forward?
for online gambling is a marked shift article, we spoke with Troy Ross, President Ontario’s iGaming offering is currently
from the current iGaming regime in of TRM Public Affairs, a leading Canadian tied to some degree to those of other
Ontario. Currently, the Ontario Lottery public affairs consultancy in gaming and provinces. Quebec, Ontario, Manitoba
and Gaming Corporation (OLG) and other regulated industries, who shared his and British Columbia share player liquidity
the Alcohol and Gaming Commission belief that there are strong indicators that for some games such as progressive slot
of Ontario (AGCO) are tasked with the Ontario is leaning towards some version games like IGT’s Mega Jackpots. While
administration and regulation of iGaming of Denmark’s model. Denmark’s online terminating the shared liquidity with
in Ontario. The OLG is a Crown gambling regime is noteworthy because those provinces is likely possible, it is also
Corporation owned by the government of it has not capped the number of online possible that the province is restricted from
Ontario. Companies wishing to provide licensees it allows. Denmark has allowed doing so by agreement or political reasons.
their iGaming solutions to Ontario licensees to offer a wide range of gambling In addition, despite disappointing
register with the AGCO and enter into a products while still tightly enforcing results commercially, Ontario’s iGaming
commercial agreement with the OLG to regulations, and still offering a state owned portal PlayOLG.ca is responsible for a
become a provider through its PlayOLG. and operated iGaming platform. considerable number of jobs which the
com platform. This can often be a slow Until 2012 the state-owned Danske Spil province may be reluctant to eliminate.
and expensive process and companies had a monopoly over gambling activities Furthermore, PlayOLG.ca has directed
navigating it are often frustrated that, with local or international companies approximately $45 million to the Ministry
despite making the good investment in trying to access the Danish market were of Health and Long-Term Care for
obtaining appropriate registration with restricted from offering games and problem gambling prevention, treatment
the AGCO and offering their solutions sports betting services. The 2012 Danish and research;4 government revenue that
through PlayOLG.com, they face Gaming Act was passed with the purpose the province likely will not want to
competition in the Ontario market against of liberalizing while still tightly regulating jeopardize by terminating its iGaming
a sizeable, unregulated market. the gaming market in Denmark. These offering while it waits for a new
new regulations allowed for private regime to take traction and generate
New Models to Consider operators to have access to the Danish replacement revenue for the province.
A “competitive market for online iGaming market. Of f u r t her not e, t he O nt a r io
gambling,” as mentioned in Ontario’s Additionally, the Danish Gaming government has had a request for
budget, suggests a shift to competition Act has a focus on protecting underage proposal (RFP) out for a sports betting
being allowed for new B2C market individuals and other vulnerable people. platform since 2017 without having
participants. A prominent model that The Danish Gambling authority, tasked chosen a solution.
Ontario may choose to emulate is the U.K. with the role of licensing and regulating Taking all of these factors into
model. As we know, the U.K. iGaming their iGaming market, has undertaken consideration (the jobs and revenue at
regime is significantly more liberalized strict measures against illegal iGaming, stake, the game liquidity ties to other
and nimbler than its counterparts in including measures such as blocking provinces and the time it has taken the
Canada. They allow for both B2B and payments and ISP disruptions. They province to find certain solutions for
B2C licenses, opening the UK market to also have banned advertisements that its platform) it would make sense for
private companies that develop, market promote gambling.3 Consequently, the Ontario to adopt a Danish hybrid style
and operate their own iGaming platforms Denmark model is widely admired. model. This would enable it to continue
in competition with one another and Given the messaging of the Ontario operating its platform and maintain
subject to a regulatory framework intended Progressive Conservative Party, and jobs, revenue and ties to other provinces
to protect the public interest. for commercial reasons set out below, while moving forward with licensing
Despite the greater flexibility and speed it seems as if this model, or some other B2C providers and taxing their
6 | CANADIAN GAMING LAWYER MAGAZINECOVER STORY
revenue at point of consumption to Future Lottery, ruled that the Criminal Games renewed its instant games
increase government tax revenue. Code prohibits internet lotteries directed partnership with the OLG through July
or made available to purchasers outside 2022, which includes offerings on OLG’s
What about the other Provinces? the province.5 Prince Edward Island had iGaming platforms.7 It would make sense
Given the size of the Ontario market, this proposed to license a charity to operate an for Scientific Games to request preferential
shift will undoubtedly impact the other online lottery that would have accepted treatment under a proposed new regime
Canadian provinces. customers internationally and throughout in light of this, and certainly preferential
Will other provinces follow suit? the rest of Canada. The Earth Future treatment over foreign operators who have
PlayOLG revenue between May 2017 and Lottery was intended to operate in all been active in the Ontario market without
May 2018 was $73.1 million, well behind provinces of Canada despite not being having registered with the AGCO. The
the revenue of $180 million brought in licensed by any of those provinces except province will have to iron out these and
by B.C.’s PlayNow, despite B.C. having Prince Edward Island. Both the Court countless other details prior to adopting
a third of the population. The need to of Appeals in Prince Edward Island and the new regime; a time consuming
shift to an alternative model in B.C. may the Supreme Court of Canada found this undertaking to say the least.
therefore not be as acute. Loto-Québec to be prohibited by the Criminal Code. The best bet at this point, based on
may similarly not feel an acute commercial This ruling could at least stem the tide of all available information, is that the
need to shift to a new regime. However, if players eager to play in Ontario from other government will move towards a Danish
Ontario’s new regime shows extraordinary provinces. If Ontario does not require it inspired system that places an emphasis
return to the province, these won’t be on its own volition, other provinces could on consumer choice, responsible play and
easily ignored. take legal action to attempt to compel the consumer protection. However, as of this
As discussed above, should Ontario province of Ontario to require its iGaming writing they have published no expected
completely abandon its platform the licensees to implement geolocation and timeline for rollout.
immediate effect on other provinces geo-fencing technology to ensure that Ontarians spend an estimated $500
would be the reduced liquidity in certain Ontario restrict its licensees to only offer million per year on offshore, grey market
games and the possible negative impact their solutions to players playing from gaming websites.8 As the Ontario iGaming
on revenue that would result to other inside Ontario. regime liberalizes, it is likely much of this
provinces. A more material repercussion spending will move back into the province.
could be that a liberalized Ontario OLG’s ETA? These developments make Ontario
iGaming framework could also attract The process of iGaming liberalization an essential market to monitor. It has a
more companies to Ontario eager to take in Ontario is still in its infancy, which population of 14.5 million, almost double
advantage of the expanded opportunities, has limited the amount of information that of New Jersey and almost equal in size
bringing with them jobs and investment available to predict exactly how the shift to that of the Netherlands. The ability to
dollars. Certainly, other provinces will take will occur. The Ontario government has reach out more effectively to a market of
note of such positive economic spin-offs. said that as a first stage, they are focusing that size and value in a more unrestricted
Some may feel compelled to compete for on speaking with industry stakeholders to manner for the first time is a sea change
jobs and consider liberalizing their markets develop and shape the market.6 It is possible in our Canadian iGaming industry and
for that reason alone. that current gaming licences may transfer cannot be ignored. CGL
Another question that arises in a possible to the new regime. This would certainly
opening up of the Ontario market is be a concern for companies who have Ron Segev is the founding Partner of Segev
whether or not new Ontario market recently navigated through the process of LLP, a full-solutions business law firm
participants can take business directly away obtaining registration with the province recognized worldwide as a leading online
from other province’s — BCLC’s Playnow. and negotiating a vendor agreement gaming and betting law firm, and having
com or Loto-Québec’s EspaceJeux.com, with the OLG. Those companies may an expertise in technology, commercial,
for example. Will Ontario be pulling argue that they should have preferential regulatory, compliance, finance and securities
players away from other provincial treatment over other companies as a result law. He is a General Member of the
platforms? of having navigated through the process. International Masters of Gaming Law and
The April 2002 Supreme Court of For example, on May 24, 2019, after the recognized as a leading gaming lawyer by
Canada decision in Reference re Earth Ontario Budget was released, Scientific Chambers & Partners.
1. http://budget.ontario.ca/pdf/2019/2019-ontario-budget-en.pdf 6. http://budget.ontario.ca/pdf/2019/2019-ontario-budget-en.pdf
2. https://www.gamblingcommission.gov.uk/about/Who-we-are-and- 7. https://www.gamblinginsider.ca/casino-news/olg-extends-instant-win-
what-we-do/How-we-regulate-the-gambling-industry.aspx game-deal-with-sg/
3. http://cphpost.dk/news/113666.html 8. https://calvinayre.com/2018/10/11/business/ontario-online-gambling-
4. https://www.playolg.ca/content/olg/en/info-support/olg-gives-back.html revenue-rising/
5. https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/2040/index.do
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