Four years ago, when the current Ontario Government was elected, its officials sat down to consider ways to raise funds for the province. Politicians convened, producing a dossier with every possible solution to this issue. Approximately 40 pages in, buried toward the bottom of the list, was a single sentence suggesting the legalization and regulation of the region’s iGaming market. Among other things, it cited losses of over $500m of handle per year to offshore operators.
With that, the Ontario Government held its first iGaming consultations and, in the weeks and months that followed, the province’s legislatures would meet with operators and experts to form an idea of what an iGaming market in Canada’s most populous province would look like.
The road to the single-event sports betting market we know today was rather more tumultuous. Prior to 2021, the criminal code of Canada prohibited betting on singular sporting events. During this time, billions of dollars flowed out of Canada to unregulated sportsbooks across the globe.
Questions began to be asked of this practice in 2008, when proponents of a regulated single-event sports betting market approached the Government for a change in this criminal code. These attempts – which came as three separate proposals over a number of years – initially failed to garner the support needed, getting as far as the Senate in 2011, where it was never voted on.
The tides began to turn, however, as the evidence of sports betting’s success in the United States became irrefutable. As the money flooded into the states that legalized the pastime, operators, suppliers and professional sports teams alike came together in Ontario to push the proposal through. These efforts would pay dividends, and, in 2021, Bill C-218 was passed, paving the way for Ontario’s citizens to legally bet on single sporting events for the first time in the province’s modern history.
As things stand, we are just over a month on from the launch of a market big enough to rival the Empire State. For an informative chat on where things stand, we sat down with Paul Burns, CEO and President of the Canadian Gaming Association.
*This interview was conducted a week prior to the market’s launch.
Can you give us an overview of Ontario’s iGaming and single-event sports betting market?
Ontario’s gaming market is unique to North America because it is open license, meaning any company that wants to apply to operate is free to do so. There is no tethering and no restrictions on this. A unique feature of this market is that operators will be registered with the Alcohol and Gaming Commission of Ontario, the regulator, and they will also have to sign a commercial agreement with iGaming Ontario, which is an agency that was created to manage the iGaming marketplace. This is required because under Canadian law, the federal criminal code states that all gaming in Canada is illegal unless it is conducted and managed by the provincial government and its agents. The commercial agreement with iGaming Ontario allows the operator to become an agent of the province of Ontario and thus satisfies that legal requirement. The market will also feature a revenue share model, 20% to the Government, 80% to the operator.
Being the fifth largest jurisdiction in North America, Ontario has a wide open market. Licensing will cost just $100,000 per year. It is ultimately a regulatory model based on the potential of outcomes. This puts a lot of the compliance pressure on the operators, with suppliers having to be registered but not quite licensed per se.
In some ways this is more similar to a European-style market, rather than the ones we have seen in North America so far. Obviously, the simultaneous launch of both sports betting and online gaming creates a unique opportunity, especially for sportsbook operators that want to launch casino games with their offerings. Overall, the Ontario Government came at this with the aim to enhance consumer protection and choice. This is why operators that previously existed and thrived in the gray market have been allowed to transition into this fully legal one.
How big can the Ontario market be? Any revenue estimates for the first year?
We are not certain at this point. The estimate we have heard is roughly $1.5bn in gross gaming revenue per year. I think this is fair but also slightly conservative. We will need to see how much growth there is, especially on the sports betting side; I think this is where the opportunity is. In the last week we have seen a real advertising push from theScore, BetMGM and PointsBet as they prepare for launch. This estimate is what people are talking about, but I say let’s see. As operators join the market and offerings grow, we will see where this goes.
Will Ontario spur the rest of the nation’s provinces into launching? And will every province adopt the joint iGaming and sports betting idea?
In regards to the second part of that question, no, I think each market is going to take a different approach. A lot will watch and see what the Ontario situation is. Will we see a replication of Ontario’s open market? My inclination is to say I don’t think so. I think we will see a version of tethered markets; this is partly because of Ontario’s high population. Along with population, there is a strong land-based tradition in a lot of provinces that the Government has to take into account. Other provinces will take on more of a hybrid method.
How will land-based – more specifically indigenous – operators be impacted by this launch?
Each province’s approach to indigenous gaming is different. Ontario shares in revenue with First Nations. The percentage of this revenue is decided by the Ontario Lottery and Gaming Corporation and currently the province is in the process of negotiating a similar deal in regards to online revenue. The five land-based operators in Ontario are free and anxious to be in the online market. We want to see red tape disappear for these operators and a more streamlined approach arise. All the operators are working hard to enter the market. They already have strong customer bases and we need to make sure that the regulatory structures are in place for them, but it is still a work in progress.