AG: 85% Of Ontario Online Gambling Going From Grey To Legal Is “Phenomenal”

Written By Dave Briggs on June 21, 2023
Queen's Park

Ontario government leaders touted some impressive numbers at the Canadian Gaming Summit about the province’s first year of an open online gambling sector. The most important may have been the percentage of operators that ceased taking bets illegally and joined the regulated market.

“Projections are that about 85% of the [grey] market came in [to the legal sector],” said Ontario Attorney General Doug Downey. “That’s phenomenal in one year.”

Attorney General Doug Downey
Attorney General Doug Downey (Dave Briggs / PlayCanada)

Martha Otton, the executive director of iGaming Ontario, said of the 45 live gambling operators in the province, 36 were previously operating in the grey market. That means they were taking bets illegally from Ontarians for many years prior to the April 4, 2022 launch of the regulated market. (Note: a handful of live, legal operators did not take bets in Ontario prior to launch).

“Those [former grey-market] operators were able to successfully bring their players with them [into the legal sector],” Otton said. “It’s easier for us to count the number of operators, but of course, if the players don’t come with the operators, the whole initiative fails. So, I think credit to the operators who were able to move their players over as they entered the regulated market.”

Total bets expected to top $14.4 billion, revenue of $567 in next report

That conversion has translated into both growing revenue and total bets in the regulated Ontario online casino and sports betting market.

Unlike US jurisdictions which release financial information monthly, Ontario releases data quarterly. And each quarter of the fiscal year 2022-23 proved to be significantly better than the one prior in Ontario.

At the Summit, Otton said Ontario online gambling numbers for the first quarter of FY 2023-24, which ends June 30, are expected to be about 3 1/2 times larger than those in the first quarter a year ago.

In Q1 a year ago, total bets were $4.076 billion and revenue was $162 million. Take those numbers and multiply by 3.5 and you would get an estimated handle of $14.4 billion and a rough revenue of $567 million.

That’s up, marginally from the fourth fiscal quarter (Jan. 1 – March 31, 2023) when Ontario’s market had a handle of $13.9 billion billion and revenue of $526 million.

For the entire first fiscal year, the province recorded $35.5 billion in online bets and revenue of $1.4 billion. Those figures do not include numbers from the Ontario Lottery and Gaming Corporation’s online business. The OLG produced record numbers last year.

“[One of] the government’s goals is just to capture some of the lost revenue that was leaving the province previously [to the grey market],” Otton said. “I think you’ve all seen our reports with $1.4 billion in revenue last year… We are certainly on track to exceed what it was that we returned to the province last year.”

Grey market blues

That revenue growth revolves significantly around growing the legal market.

Ontario and the other Canadian provinces have had a unique challenge with grey-market gambling operators.

The grey market consists of those companies that take bets illegally, but continue to operate with impunity due to a lack of enforcement.

In the United States, the concept of a grey market is largely a foreign one. There, the line of delineation is more between legal white-market sites and illegal black ones. Illegal sites are more successfully blocked from being accessed.

Mike Maodus of the law firm Blake Cassels & Graydon told the Summit that in Canada, “historically, a real lack of enforcement action has taken place and it allowed the grey market to develop.”

Bruce Caughill, the managing director, Canada of Rush Street Interactive that operates BetRivers, said, “the reason for less enforcement action [in Canada] is that in the US… through the bank act, they’re able to target practical payment issues. And they have so many more tools in the toolbox.”

All that speaks to the strategy of Ontario’s regular, the Alcohol and Gaming Commission of Ontario, and its subsidiary, iGaming Ontario, to try to woo grey-market operators over to the legal market.

Otton: We still want to know why some continue to gamble in the grey market

Otton said iGO’s goal was to get 90% of the grey-market operators converted over to the legal market within the first five years. She said getting 85% moved over in year one “is beyond what our expectations were.”

iGaming Ontario executive director Martha Otton
iGaming Ontario executive director Martha Otton (Dave Briggs / Play Canada)

Still, iGO knows there are a number of players still betting through both regulated and unregulated sites.

“I’d like to understand why,” she said. “What is it that they’re getting on the unregulated site that isn’t offered in the regulated sites or their products?

“There are certain segments that are being addressed by the markets that we’re missing. So, I like to delve a little more into the data.

“I’d like to start getting a little more input from the players… I’d like to see, in the coming year, more conversations from those who are the end users of the product and why is it that a number of them continue to play on unregulated sites, and how is it that we can keep them engaged in what it is that we’re doing?”

AGCO CEO Mungham is working with other regulators to stop grey-market operators

AGCO CEO Tom Mungham told the Summit that a recent Ipsos survey revealed some of the grey-market sites gamblers were using. He said the AGCO found the jurisdictions where those operators were licensed. Mungham then wrote to regulators in those regions and asked them to convince those operators to stop taking bets from Ontarians illegally.

“I’m getting extremely positive responses to the letters that I’ve written to the major and significant regulators across Europe and other places,” Mungham said. “There are other regulators that perhaps may not have the same perspective. I wrote to Curaçao. I have not heard back from Curaçao yet, but we will continue to go down this path.

“The AGCO has levers that we can pull and we’re going to work with those. Over the next year or days, our effort is going to be focused a lot on improving that channelization rate because from that will flow protections for individuals and players, greater economic benefits to the province and I think a vibrant, strong and sustained industry. So, lots of work with partners right across government and with law enforcement. There’s lots of work to be done. This is going to be a primary focus for us now as the market, from our standpoint, stabilizes.”

AGCO CEO Tom Mungham
AGCO CEO Tom Mungham (Dave Briggs / Play Canada)

Gambling ads crackdown coming within weeks, not months

Mungham also told the Summit that tougher advertising rules for gambling operators, “is just weeks away, not months.”

In April, the AGCO said it is intent on banning the use of athletes and celebrities in online gambling advertisements. It is an effort to mitigate gambling’s appeal to children.

Mungham said the regulator is also looking at what it can do to stop advertising for unregulated free-to-play sites such as Bodog.

“Those advertisements are designed to channel you to a play-for-money site that doesn’t have a place in Ontario in my view,” Mungham said. “So, we’re pulling again, whatever levers we can and using relationships to begin to engage media companies as a first step in trying to get some of that advertising down… So, there is lots of work going on there, including outreach to the federal government around a number of different initiatives where they have authority, as well.”

Another goal: improving player protection, centralized self-exclusion

Otton said another goal in the year ahead is to improve player protection. Apart from 45 operators, Ontario has more than 70 gaming sites and more than 500 legal gambling games.

“We have one of the most open gaming catalogues certainly in North America with sports betting products as well as casino games,” Otton said.

“I won’t speak to the registrar’s standards, other than to say they’re world class. But in addition to that, we require all our operators to have a [responsible gambling] check. We have seven operators that have completed that now and the others are well on track to meet the two-year timeline to do that.

“In addition to that requirement for operators to spend a certain percentage of their gross gaming revenue on responsible gambling messaging and education, we are working towards a centralized self-exclusion, which will be the first of its kind in the province. It will allow players to self-exclude on all products across the province. But there’s more work, certainly, that needs to be done.”

What has been accomplished, so far, earned high praise from the Attorney General.

“It’s remarkable how far we’ve come in one year,” Downey said. “It actually doesn’t even feel like a year. It feels like the industry has been here for a while.”

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Dave Briggs

Dave Briggs is a managing editor and writer for Catena Media. His expertise is covering the gambling industry in Canada with emphasis on the casino, sports betting and horse racing sectors. He is currently reporting on the gaming industries in Canada and Michigan.

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