Whether counting by weeks (seven), days (49) or hours (1,176 and counting…), one thing is clear. Ontario’s big day is fast approaching.
With that date, April 4, now in hand, private online casinos and sportsbooks in Ontario have a target to aim for as they get ready to launch in the province.
Many private operators have already submitted applications for registration with the Alcohol and Gaming Commission of Ontario. And, according to an industry insider, since iGaming Ontario revealed the go-live date submissions have begun rolling in even faster.
The early bird gets the worm
For a few eager beavers, getting their applications in early means getting the regulatory all-clear before many of their peers. The first out-of-the-gate, in that sense, was PointsBet Canada, who announced they were good to go on Feb. 3. theScore Bet followed PBC’s lead a few hours later. And on Feb. 4, Canadian esports and sports betting provider, Rivalry joined the fun.
With registration in hand, these three, and those that follow, can tackle the next hurdle; executing agreements with iGO. Once operators have commercial agreements in place with the agency charged to “conduct and manage” the new market the rest should be smooth sailing.
We can expect industry giants like DraftKings, FanDuel, Caesars, and BetMGM to join the early adopters jockeying for space in the market. And new companies in the ecosystem, like NorthStar Gaming, will need to find their footing too.
Show me the money
Before we had an official date — even before Bill C-218 allowed for single-event sports betting — we were talking about money. In fact, expected tax revenue is a big reason the bill even passed.
According to Canadian Gaming Association’s president Paul Burns, allowing Canada’s unregulated market to flourish was forcing a lot of cash offshore.
“This is another major milestone and achievement for Ontario’s gaming industry,” Burns said in a statement on Jan 28, after Ontario announced the launch date.
“We finally have the opportunity to safeguard the economic benefits that will start to flow to licensed gaming operators and the provincial government.”
So, now that Ontario’s coffers will reap the benefit of industry tax dollars, we wonder, how much money will the province see as a result?
If nothing is certain but death and taxes, what will Ontario’s gaming tax rate be?
Despite how soon Ontario’s online gaming market is expected to launch, it is still unclear what the province’s rake will be.
However, sources in the industry say it’s rumoured, and likely, to be near 20%.
Here it’s important to note that due to the way Ontario’s market is to be structured operators aren’t actually subjected to a tax at all. Instead, they are required to enter into a revenue share, as lined out in the commercial agreements.
The expected 20% share rate would be allotted to the public sector.
PlayCanada reached out to iGO for details surrounding the revenue shares. While iGO did reply, it was only to say they couldn’t say anything.
“Unfortunately, iGaming Ontario cannot comment on share agreements or revenue share rates,” said iGO in an email. “The percentage of the Operator revenues that must be shared to the province is pursuant to an operating agreement and is not a tax”.
But, presuming Ontario does adopt a 20% revenue share for online gaming, that’s quite a bit different than the 55% land-based casinos in Ontario pay. This was a primary gripe with Great Canadian Gaming Company’s recent opposition to the proposed online market.
In any case, we can use the 20% to get an idea of how much tax revenue Ontario can expect from the regulated market.
How does Ontario’s 20% stack up against US state gaming taxes?
Now, tax rates in US states can wildly vary, but for the sake of comparison, let’s take a look.
In the US, states like Delaware, Michigan, New Jersey and Pennsylvania regulate online betting on slots, poker, and table games.
Tax rates for online casino operations in each of these states, and a few more, span a range from 15% (NJ) to 62.5% (DE).
- New Jersey: 15% (online casino)
- Connecticut: 18% (online casino)
- Michigan: 20-28% (linked to revenue)
- New Hampshire: 51% (online gambling tax)
- Pennsylvania: 54% (slots), 16% (poker & table games)
- Delaware: 62.5%* (50% revenue share +12.5% vendor fee)
In comparison to many of the above states, Ontario’s 20%, on the low-end, seems reasonable.
A deeper look: Delaware
Delaware allows all forms of online gambling — from sports betting to casinos — and was among the first US states to legalize.
But, the Diamond State requires a heavy tax share which can make operators wary of doing their business there.
In addition to a high tax rate for online casinos, Delaware also requires operators to pay a operator fee.
The state also holds 100% of an operator’s gross annual revenues up to US$3.75M. If operators bring in more than that, the state then takes at least 40%.
So, states like Delaware with high taxes and fees may prevent online casino operators and sportsbooks from achieving the kind of revenue they can elsewhere. This, in turn, could negatively affect potential tax revenues as operators forego the state.
Fortunately, that should not be the case in Ontario.
A lesson in contrast: New Jersey
New Jersey instituted a 15% tax rate, one of the lowest in the US.
Online casino revenues in the state are mostly driven by dominant operators like DraftKings, FanDuel and BetMGM — all of which have expressed interest in Ontario.
Together with Golden Nugget, these brands generated most of the casino revenue for online wagers placed across legal jurisdictions.
In total, Garden State’s online gaming industry generated nearly $259 million in tax revenue since 2013. The money went to state and local governments.
With millions of people and a 20% revenue share, Ontario seems more a New Jersey than a Delaware in terms of market-friendly terms.
What does Ontario’s possible 20% mean for operators?
Indications so far seem to show that operators’ interest in Ontario will not be dampened by the province’s rumoured 20%. Not in Canada’s most highly populated province. And not when Ontario’s 15 million residents could generate as much as $1 billion in the market’s first year.
According to estimates, Ontario’s online gambling industry could hit $1.86 billion by 2026.
By all accounts, operators appear ready to exchange a piece of the action for a slice of the billion-dollar pie.
