By way of intro, can you tell us about the Canadian Gaming Association (CGA) and what you personally do in your role?
The CGA is the national trade association for the gaming industry in Canada. We represent operators and suppliers both in land-based and online gaming, and our primary role is around education and advocacy. Because of the large government involvement in gaming in Canada, we often do advocacy work to government, like we’re doing right now on sports betting. And we work cooperatively with regulators and other entities across the industry, as well as stakeholders, to really further enhance the opportunities for the gaming industry.
It must be a very busy time for you at the moment.
It has been. Right now, most of the casinos in Canada are closed due to COVID-19 restrictions. So obviously 2020 was a horrendous year for the industry and it’s carrying on into the early part of 2021. But there are some really good bright spots on the horizon, like finally getting Canada sports betting modernized to permit single-event wagering. Parlay wagering has been legal for years but not single-event wagering, and Ontario is moving to create a regulatory framework to license online gaming. As everyone probably knows, Canada has a quite robust gray market. Ontario is the first jurisdiction to try and tackle that, and try and bring some regulatory framework to online gaming. So there’s some really great opportunities heading in 2021, and that’s what we’re focusing on right now.
The two fundamental developments you mention are certainly something the industry has noticed. The first I wanted to ask you about was sports wagering. Could you talk us through how it currently works in Canada? I simply can’t imagine it not being legal to place a bet on one event without having to bet on another.
The legal wagering options in Canada are through the sports lottery products offered by the provincial lottery providers. There are tools and prop bets in most jurisdictions, so you have to create a parlay, a minimum of three in most cases, some places it’s two, to place a bet. Even a couple of years ago prop bets weren’t found so you’d probably have to parlay with an NHL game or two to place a bet on the Super Bowl. That’s really what it’s been and that’s why Canadians really gravitated to the online, offshore market. There’s quite a robust illegal bookmaking business in Canada primarily operated by organized crime. And so Canadians bet almost CA$14bn (US$11bn) in the illegal offshore channels, versus about CA$500m through the sports lottery products. That alone tells you where the preferences are for where consumers have chosen to go and get their products.
What is the exact timeline for the legalization of single-event sports wagering?
It’s been a frustrating odyssey, to say the least. It’s been about 10 years for me personally working on this. We’ve previously had a bill passed from the House of Commons but didn’t pass our Senate, the second chamber. So this time we actually have two bills right now in the House of Commons. The Government, sensing and understanding the need to get it done, introduced their own bill in late November. They’re almost identical and we’re hoping one of the two of them is successful in the next few months. The frustrating part has been every major party in the House of Commons has supported these initiatives.
So it’s a matter of process standing in the way; that’s the agonizing part, the wheels of government don’t turn fast enough. The growth in the US marketplace has been tremendous and that spills over into Canada, when we see a lot of US broadcasts of sports, so the awareness of increased sports betting interest is rising. The best-case scenario for these bills is this spring. We are working as hard as we can towards that, hopefully encouraging the parliamentary process to pick up the speed and get it done.
I can certainly understand your frustration. If the bills are passed in spring, would that mean a market launch in spring or would that come later down the line?
That would probably be a bit later. The provincial governments, much like the US, have their own regulatory framework. Right now, the CGA has an industry committee working with regulators. There is some level of harmonization across the country, because we’re not a big country, so we’re finding ways to make it more advantageous for suppliers and operators to do business jurisdiction to jurisdiction. I think a launch would come in late spring or summer; definitely by the fall. There are no other legislative issues that need to be taken care of,even at the provincial level; it’s all done by regulations. The legislative wheels will be done and the provinces can then choose when and how – and it’s up to them.
That sounds like a cause for optimism. You mentioned US gaming before: some US states have absolutely flourished, like New Jersey, but others find themselves in a similar situation to Canada. Would you say the COVID-19 pandemic has really changed the opinion of policymakers, like it has in certain US states?
In the fall, we were quite hopeful things were moving quicker because of the government bill. The provincial governments have been supporting the industry as best they can during COVID-19. And we were asking the Federal Government to pass this, saying, “It doesn’t cost you anything; it’s a huge help for our industry to be on a level playing field with the offshore market and others.” They heard us but it’s again the execution where we’re a little concerned right now. It’s not moving as fast as we would like.
How about the timeline for online gaming in Ontario. Can you talk us through the latest developments there?
The Ontario Government announced in the spring of 2019 they would look to explore options to regulate online gaming, in recognition of the large gray market that’s occurred. Ontarians are probably betting CA$500m through the gray market. So they’ve started a consultation with industry through the Alcohol and Gaming Commission of Ontario. This past fall, the provincial budget announced they’ll move forward and there’s more structure to it now. It will be done through the Alcohol and Gaming Commission, rather than through the Ontario Lottery & Gaming Corp. Now, what we’re waiting for is the last round of consultation to begin. And that’s really around looking at finalizing regulatory standards; Ontario’s taken a really progressive approach when looking at this.
It’s hard to ask companies that already have customers to come into the regulated market and be taxed. It’s a delicate balance to try and achieve that. They want it to meet some regulatory best practices but not be overly aggressive in terms of tax rate. That needs to be finished in the next few months; more discussions are needed on market structure and taxation fees – that’s the next round. The understanding is, without a firm date on when the market will open, there’s an expectation that it’ll be by 2021, perhaps late Q4. There are other jurisdictions taking a hard look at what Ontario is doing; I don’t expect them to start until they look at how Ontario has launched. But they’re optimistic and we’re seeing good signs for the gaming industry in Canada. We want to level the regulatory playing field and make sure everybody’s playing by the same rules.