Opinion

Many steps remain before Canada betting regulation

With a government-backed betting bill in the parliamentary works, hopes are high that operators will be able to offer sports bets on single events in Canada in the near future. 

However, a number of factors must fall into place before that happens. The first is that the bill will work on a provincial basis. 

Ontario is the province that is pushing for the bill to go through.

It makes up 45% of Canada’s population and is the economic engine of the country. 

According to H2 Gambling Capital, the onshore regulated online operators will generate CA$104.3m in revenue in Ontario in 2020. Offshore unregulated companies will record four times that – CA$418m in revenue.

Those numbers illustrate why the provincial authorities are pushing for regulation.

Diverging provinces

However, historically at least, its nearest counterparts in terms of wealth, Quebec and British Columbia, are opposed to regulation.

The reason is political. Those provinces’ lotteries want to keep their monopolies. 

Potential regulatory divergence between the provinces would raise the intriguing prospect of seeing Ontario regulate its igaming industry, while British Columbia or Quebec don’t. 

The fact so many offshore sportsbooks and casinos have been highly active in the market for many years raises another prospect.

Many could get licensed in Ontario but would keep working in the other regions unregulated, even if such a scenario seems unlikely.

An industry contact who has worked closely with both provincial regulators and igaming companies in Canada told Wedge News: “From a business perspective it would seem surreal if they didn’t agree to regulate their provinces.

“But lotteries historically are big state operators and they generate a lot of money.

However, they are also bloated bureaucracies that don’t welcome competition. Politicians also don’t question them because they generate such revenues.” 

Fundamental shift

The business perspective seems clear, but for the lotteries there is also the question of where the regulation would lead. 

“They are also concerned because it shifts conduct and management from the lotteries to provincial governments,” says the contact. 

“This has never been done in Canada and for the lotteries you could say it would be the beginning of the end.

If regulation works for sports betting it could also work for other verticals like casino, keno or lottery.

They will be keeping a very close eye on proceedings.”

Whether Canadian regulations follow the New Jersey or Pennsylvania model of requiring betting brands to partner with land-based casinos is open to question. 

Hard Rock and Mohegan Sun are two brands that already offer online casino in Ontario, but up to 80% of Canada’s casino groups don’t.

“They are currently exploring potential relationships with online companies,” the industry contact adds.

The tax rates and how the difference between online and land-based will also play a key role.

The Ontario Lottery and Gaming Corporation has privatized casinos. It leased many of its premises on 22-year terms. Tax rates were sometimes set at up to 60% of gross revenues.

“If online is taxed at 20%, (land-based casinos) will be very interested in exploring that opportunity. 

“Those stakeholders will also want to look at harmonizing the tax levels, especially as many of the KPIs for physical venues are based on metrics that might not be sustainable because of the pandemic.

Overturn the federal ban 

“It’s not imminent and there is lots of minutiae to get right. But the government has to pick a lane before deciding where to go.” 

First Nation casinos and the horse racing pari-mutuel groups and venues will also want to protect their interests.

Canada is a wealthy country with an affluent population that understands online betting and gaming. It also has the disposable income with which to play. 

For Ontario there is also the fact the neighboring Michigan offers legal sports-betting just a short drive away. 

But first the bill to defeat the ban on single event sports-betting must get on the statute books.

Wedge News’s industry contact says there are still many steps to get through.

And with a minority government there is no certainty parliament will see it through.

“In addition, for the federal government betting is not a priority. It doesn’t receive much money from betting.

“If the federal bill doesn’t go through, the whole thing falls apart.”

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Jake Pollard

Jake Pollard is an experienced journalist and editor who has covered the online gaming and betting industry for many years. He has written for the leading media outlets as well as operators and suppliers in the igaming space. His current areas of focus are wide-ranging and include regulatory developments in the US, emerging markets in South America and how European countries are adapting to a decade of igaming regulation.

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