Ontario Online Casino Rules Shortchanging Province's Taxpayers

Ontario consumers are being shortchanged by an explosion of gambling in the province.

And Ontario’s strange mix of regulatory rules for its online gambling sector is at the heart of the problem.

On April 4, the province launched an open environment for Ontario online casinos and Ontario sportsbooks. Since that time, a whopping 25 online gaming operators have opened for business in Canada’s most populous province. Some projections are that there could be as many as 70 in the market when it hits its peak.

What came with the launch was a hodgepodge of sometimes progressive, sometimes overly-restrictive rules from the Alcohol and Gaming Commission and its subsidiary agency iGaming Ontario. In totality, the regulations are unlike any that exist so far in North America.

That the rules are sometimes contradictory and often unnecessarily confusing is important here since the true cost of all this is born by Ontario consumers.

How Ontario taxpayers are being shortchanged

Why should Ontario taxpayers care about how gambling is being regulated?

Simple.

The main point of allowing gambling to become even more pervasive in Ontarians’ lives — at an obvious cost — is to drive government revenue. All this is, purportedly, to better serve the province’s citizens. It’s no secret that gambling is a voluntary sin tax that governments are increasingly relying on to pay bills without resorting to raising taxes for all.

What, exactly, the Ontario government plans to do with this increased revenue is something of a mystery. The province has not said where online gambling revenue is being earmarked.

More importantly, nearly five months into this expensive experiment, Ontario taxpayers have zero idea how much revenue the gaming industry is bringing in.

Before the June 2 election, the Ministry of Finance said revenue reports would be made available after Ontarians went to the polls. Shortly after the election that returned the incumbent Progressive Conservatives to a majority, that same ministry told us online gaming revenue figures would be released “soon.”

Ten weeks and counting since revenue figures were coming “soon”

I’m not sure how the ministry defines the word “soon,” but more than 10 weeks later certainly isn’t it.

The lack of transparency is troubling.

Ontario citizens have a right to know how much this massive gambling expansion is delivering to them. Taxpayers are also entitled to know what the government plans to do with the money in order to hold it accountable.

In the past, the Ontario government has said gambling revenue goes into its general coffers to support such big-ticket items as health care, education, social assistance, infrastructure, etc. Such revenue also goes to tackling debt. Given the massive hole the Ontario government dug itself during the COVID-19 pandemic, it’s little wonder it has gone all in on gambling to try to climb out.

Is Ontario open for business or not?

Admittedly, that left the AGCO and iGO with a difficult mission: Provide a gambling framework that is true to Premier Doug Ford’s slogan that Ontario is open for business while also protecting consumers.

But is Ontario open for gambling business, or not? The rules that govern the industry make the answer fuzzy.

On one hand, the province is wildly progressive in terms of what kinds of gambling are allowed, the number of operators that can offer it — it’s basically unlimited — and the ability for those operators to saturate the airwaves with ads to try to attract customers.

On the other hand, AGCO believes the best way to protect consumers is to ban operators from advertising bonuses, inducements or credits. The operators can — and do — have those customer acquisition tools, they just can’t openly advertise them.

Essentially, you’re welcome to do business in Ontario with one armed tied behind your back.

Advertising rules a frustrating scavenger hunt

From a consumer perspective, having to go directly to each operator to find out what they are offering to sign up is a maddening, time-consuming scavenger hunt.

How on earth consumers are better off not easily knowing their options is beyond me.

I appreciate the attempt to reduce problem gambling here. So, points to the regulator for the effort.

But if the AGCO is truly concerned about the problem gambling part of all this, why not restrict or entirely ban those bonuses, credits and inducements? Better yet, why not restrict how many ads operators can place and spare our sanity from the incessant, brain-numbing messaging intruding on our favourite sporting events?

It’s just another of the regulator’s conflicting stances.

Regulator inexplicably handed non-legal operators a sweet deal

The most egregious decision concerns how the regulator is dealing with grey-market operators. These non-legal companies have long taken bets from Ontarians.

AGCO CEO Tom Mungham acknowledged at the Canadian Gaming Summit in Toronto this June that some grey-market operators were dragging their feet about coming to market.

Inexplicably, the regulator is allowing these same non-legal sites to delay becoming regulated without penalty.

Why? Operators have had plenty of time.

Ontario’s move to a regulated market was first announced shortly after single-game wagering was legalized in Canada in August of 2021. iGaming Ontario began accepting operator applications on Sept. 13, 2021. The April 4 launch date was known for nearly 10 weeks after it was first announced on Jan. 28.

That means grey-market operators have known for almost an entire year that they needed to move to the regulated market. They have had a firm target date for almost seven months now.

Yet, the regulator has allowed them between three and six months after the April 4 date to complete the move. We’re now nearly five months in, and many notables have yet to make the switch. Meanwhile, they continue taking bets from Ontarians — with the government and the people of the province receiving none of that money.

A long list of operators received a license from the AGCO and signed an operator agreement with iGO allowing them to be open for business right on April 4 or shortly thereafter.

Why have regulators given grey-market operators a pass — or at least a pass for so long?

AGCO has declined to comment to Catena

For two months, PlayCanada has repeatedly asked the AGCO for comment about how it plans to bring grey-market operators into the white market.

The AGCO has declined to comment, stating that it believes PlayCanada’s parent company, Catena Media, is not in compliance with AGCO advertising rules in Ontario.

Catena Media is an affiliate. That means it produces content — a wide range of fact-based articles about the gambling industry — in exchange for driving traffic to operator sites. Our very clear mission is to support regulated gaming around the world.

Operators are held accountable for the advertising they do in Ontario. Yet, Catena has been working with an AGCO compliance officer to resolve any misunderstanding of the rules. Though, one thing remains confounding:

Ontario does not regulate or license affiliate sites. So, how is Catena not in compliance?

It’s just another indication the rules are far from clear.

Meanwhile, the clock keeps ticking, and grey-market operators keep operating.

The black and white on grey-market operators

Allowing grey-market operators to remain in business is fleecing both Ontario taxpayers and regulated sites.

Grey-market sites also had a considerable advantage coming into Ontario’s regulated market. The regulator’s rules allowed any that applied prior to April 4 to, effectively, keep their existing customers. Yes, customers had to re-apply to use those sites. But, being able to keep and utilize their databases to retain clients was a sweet bonus for not operating legally in the province.

Add it up, and that’s an awful lot of competitive advantages for those less-than-legal sites.

Shouldn’t one assume being open for business means businesses should expect to compete on a level playing field?

The time has come for Ontario to follow the lead of most US jurisdictions and declare operators either black or white. Then the regulator must move swiftly to ban those black sites from being able to take bets from Ontario customers.

After all, one of the key messages in all this was about consumer protection and keeping gambling dollars in the province rather than letting them go offshore.

And it’s not like the AGCO isn’t aggressively dealing with its regulated operators. It has already issued a number of fines for those that allegedly flouted its advertising rules.

Consumers are clearly at risk when dealing with grey-market sites. Telling them they should bet with regulated sites isn’t cutting it. Many simply don’t know what sites are legal and what ones are not.

Legal operators display iGO logos on their sites, which is great. But I’m not sure how many Ontarians seek out or process those details, especially if they have a long history of gambling with a particular site.

Regulator killed DFS, made it difficult to offer poker

Then there is the issue of Daily Fantasy Sports and Ontario online poker.

Regulator rules effectively killed DFS in the province and have put poker on life support.

The AGCO’s decision to eliminate global poker and DFS pools and allow Ontario players only to play within the province has led major DFS operators such as DraftKings and FanDuel to stop offering DFS to Ontarians. The companies decided province-only pools weren’t large enough to offer prize money high enough to attract players.

Meanwhile, just three gaming operators are giving online Poker a go in Ontario:

888
BetMGM
PokerStars

None of which is great for customer choice.

Ontario could gross $1.56 billion this year alone

All of this is big potatoes for consumers.

Ontario is home to some 14.5 million people, making it the fifth-largest jurisdiction in either the US or Canada. Gambling has a long history in the province, meaning bettors are more savvy than most and comfortable placing bets.

The province is home already to:

29 land-based casinos.
15 horse racing tracks.
Plentiful numbers of bingo halls.
24 operators offering both online sports betting and casinos.

Online gaming revenue will be huge (if we ever see it).

All told, gross gaming revenue in Ontario’s gambling sector could grow by nearly $6.5 billion to $8.02 billion by the end of 2023, according to H2 Gambling Capital. The figures, which H2 released on July 4, peg the total Ontario gambling handle at $1.56 billion in 2022.

Online gaming operators are rumoured to be taxed at around 20%. Obviously, this is in the contracts, but nothing has been disclosed, yet, from the government. An unannounced tax rate is another lack of transparency in the framework. Yet, if 20% is accurate, that would mean revenue to the province from gambling would be the following:

2022: $312 million (on gross gaming revenue of $1.56 billion)
2023: $1.6 billion ($8.02 billion)
2024: $2.04 billion ($10.18 billion)
2025: $2.17 billion ($10.87 billion)
2026: $2.32 billion ($11.59 billion)
2027: $2.46 billion ($12.28 billion)

Over five years, that totals more than $10.9 billion in estimated tax revenue based on H2 estimates.

On the much more conservative end, Ontario Auditor General Bonnie Lysyk has other numbers. She reports the regulated gaming industry will generate around $75 million in revenue for the province over three years.

Again, lack of transparency makes it incredibly difficult for taxpayers to run their own cost-benefit analysis.