National | Place your bets
There’s a lot at stake, but there’s a good chance the federal government will finally legalize single-event sports betting, as the Safe and Regulated Sports Betting Act (Bill C-218) waits until it clears the Senate. If this is the case, it will be up to the provinces to determine the form that betting takes in Canada and to choose between implementing a competitive gambling regime or maintaining their monopoly grip on gambling.
Introduced by Conservative MP Kevin Waugh, the federal bill enjoys all-party support and backing from the sports industry and the police, both of whom opposed the legislation in the Senate in 2015.
What changed? At the top of the list, a 2018 U.S. Supreme Court ruling that struck down a federal law banning single-event sports betting outside of Nevada and in so doing turned the gambling landscape in North America upside down. Now all other states have the power to decide whether to allow it within their borders. Thirty-more have either legalized sports betting or passed a law. Pressure has increased on Ottawa to follow suit.
“Once it’s regulated in the United States, you wonder how this form of entertainment in Canada is fundamentally different from that in the United States,” says Don Bourgeois, the former general counsel for the Liquor Commission and of the Ontario Games (AGCO).
The pandemic also played a role. Federal and provincial governments are looking for new sources of revenue to offset rising government spending. Single-event sports betting is big business. According to the Canadian Gaming Association, Canadians spend $ 10 billion a year betting on a single event through illegal bookmakers, $ 4 billion through offshore online sports betting sites. This compares to $ 500 million in legal provincial sports lottery proceeds. PricewaterhouseCoopers estimates that legalizing single-event sports betting could divert $ 2.4 billion in gross gray market gaming revenue within two years.
Changing social attitudes have also paved the way for governments to adopt and change policies favoring “sin taxes” and government regulation rather than outright prohibition, says Michael Lipton, QC, of Dickinson Wright, much like when the federal government legalized the recreational use of cannabis. in 2018. It is possible, he said, to protect the public through smart regulation and “in a way that will add revenue to government coffers, which in turn will benefit the public,” Lipton said.
The bill would decriminalize single-event sports betting, currently banned under the Criminal Code, unless it is a question of betting on the result of several matches.
But just as decisively, it would open the door to a competitive gambling regime in Canada, as the provinces and territories decide how to regulate and authorize the practice. This probably marks the end of the government monopoly regimes we are all used to, giving way to private operators who could then market competitive sports betting products, online or in casinos. “The era of the public sector monopoly in gambling probably had value but more in the 2020s,” says Bourgeois, now a lawyer at Fogler, Rubinoff LLP. “There has been a drastic change in the regulatory environment. Operators are now very sophisticated, mature and highly regulated companies that provide a consumer product,” while “emphasizing social responsibility, responsible gaming , the fight against money laundering and confidentiality “.
All eyes are now on Ontario, which intends to launch a regulated online marketplace for online gaming. The province is proposing to create a branch of the AGCO that would be empowered to “direct and manage” online games operated by private parties.
Yet Canada’s unique legal framework for gaming can complicate matters. Under the Criminal Code lotteries must be “directed and managed” by provincial governments. Case law suggests that “the duty of conduct and management” will be interpreted as the “operational spirit” of the lottery system, explains Ron Segev, gaming lawyer and founding partner of Segev LLP. “So it’s possible, at least theoretically, that they are offside.” IGaming Ontario’s proposed model contemplates an arrangement where operators run their business while the province provides a registration framework and some regulatory oversight.
According to Bourgeois, the Ontario model is fully compliant with the Criminal Code. Despite this, the province’s Internet gaming discussion paper recognizes the need for a rigorous and complex framework to regulate gaming, more than what operators are used to in other jurisdictions.
There are also questions about licensing, taxation, revenue sharing and responsible gaming initiatives. Measures will be needed to fight money laundering, fraud and data protection. And will provinces be able to expand offers beyond single-event sports betting to betting on events like the Oscars or election results?
Provinces and territories also need to consider whether they should stick to the monopoly model or follow Ontario’s lead and adopt a licensing regime. “Ontario is moving away from the monopoly model, but unless other jurisdictions do the same, you will still have a problem with foreign operators competing with monopolies in Canada for Canadians to place bets.” , says Lipton. The tactics taken by the Quebec government will not fly, he said. In 2018, it adopted a law obliging Internet service providers to “block access” to a list of “unauthorized” gambling sites drawn up by Loto-Québec. The Quebec Court of Appeal struck down the provisions of the law because they violated areas of exclusive federal jurisdiction.
And then there is the question of the application of rules that vary from province to province. It appears that offshore operators – many of which are multinationals, many of which are public companies – are attracted to the Canadian market. “A number of these companies are now trading issuers on European or North American stock exchanges, and this dynamic means there are lawyers, accountants and compliance committees who don’t want to put the brand at risk.” , explains Bourgeois. “They are ready to enter a regulated market and compete in this regulated market.”
Regulators should work together and deny licenses to private operators who refuse to comply with the rules, advises gaming lawyer Jack Tadman. “As jurisdictions move toward regulation rather than prohibition, one way of enforcing would be to make it clear that a company’s actions in one jurisdiction could affect its ability to obtain a license in another,” says Tadman .
Another thorny question revolves around the involvement of First Nations. Ontario plans to hold discussions with the Ontario First Nations Limited Partnership, which represents the gaming interests of 132 First Nations in the province, on how to design and share the revenue from the iGaming market.
Meanwhile, the Mohawk Nation of Kahnawake, south of Montreal, has already carved out a reputation as a pioneer in online gambling. The Indigenous community has established a world-class localization facility and an internationally renowned online gaming authority that licenses over 50 online gaming operators around the world, representing over 100 online gaming websites. Morden Lazarus, a well-known gambling lawyer, says Ottawa’s efforts to implement single-event sports betting will have no impact on them. They already have the aboriginal right to play games under section 35 of the constitution, which protects traditional aboriginal rights, he said..
Lazarus proposed that the government of Quebec or the federal government grant legal sanction to Internet gaming operations currently operating in the territory. An agreement would provide “real insurance” to actual or potential gambling entities involved in public offerings of their titles on recognized stock exchanges. But his efforts have so far led nowhere.
This can be a problem, says Lipton. While the Kahnawake Gaming Commission “does a good job of regulating,” it has a competitive advantage in the absence of an agreement with the provincial or federal government. “These Kahnawake operators are not subject to, or at least they do not comply with, Canadian tax requirements,” says Lipton. “It may be more advantageous for an operator to be based in Kahnawake and take Canadian bets than for an operator to be licensed in Ontario under the new system …”
However, none of these issues halted M&A operations in anticipation of the new regime, according to the game’s lawyers. Score Media and Gaming Inc. (theScore) made a binding takeover bid in December 2020 for a gross proceeds of $ 40 million, while electronic payment processor Nuvei Corp. made history in September 2020 by raising $ 700 million in the largest initial public offering of a technology. company in the history of the TSX. Expect more fundraising if Bill C-218 passes and Ontario’s licensing model becomes a reality, says Segev, whose company is currently working on three IPOs for companies. games. “As far as the Canadian market in particular, we’re going to see a consolidation on the sports media and entertainment side, and we’re also going to start to see non-endemic partnerships, but that will only happen if there is a absolute clarity and certainty around legality, ”says Segev.
But don’t bet on the gray market disappearing, no matter what. If the decriminalization of recreational marijuana is any guide, “it will be more difficult for the provinces to convince the people who have these long-standing relationships with their poker dealers to change,” says Segev. “What’s the value proposition, especially if there are limits to what an operator can do in terms of VIP management, marketing and the rest? And offshore operators tend to offer better prices, better odds, and a wider variety of events a bettor can bet on.