The future of paid daily fantasy sports and online poker in Canada’s most populous province – and perhaps beyond – will be argued over next week in Ontario’s top court ahead of what could be another landmark legal decision for the gambling industry.
Ontario’s government is asking the Court of Appeal if it would be legal for online gambling customers in the province to play “peer-to-peer” games and bet against rivals outside of Canada. The hearing for the reference will start Tuesday in downtown Toronto.
While Ontario believes it should be legal for local gamblers to play DFS or poker against users abroad, if the court disagrees, the provincial government wants to know to what extent its proposed model would be illegal.
“The question before this Court is a novel one,” the Attorney General of Ontario noted in a recent court filing.
Got one here for all the folks asking me when paid DFS contests are coming back to Ontario:
— Geoff Zochodne (@GeoffZochodne) October 1, 2024
Explaining Ontario’s Daily Fantasy, Poker, and Sports Betting-Related Court Case https://t.co/pi86RGnvOJ @Covers
It’s also a contentious one. Ontario may see its proposal as legal, but others see it as dangerous. Extensive written arguments have already been made in connection with the court reference, including allegations of illegal activity, and next week’s hearing could see more legal jousting by lawyers for both sides.
A decision from the Court of Appeal could take weeks or months. In a similar situation, it took around two-and-a-half months for an answer regarding “carbon tax” legislation.
When a decision arrives, it could set another important precedent for online gambling and legal sports betting in Canada, and the second this year. In May, an Ontario Superior Court judge dismissed a legal challenge of Ontario's iGaming regime.
DFS doldrums
A “yes” from the court could revive paid DFS contests in Ontario and increase the potential player pool for online poker. Operators' business in those two areas took a hit in April 2022 when Ontario launched a regulated and competitive iGaming market that required all players to be in the province.
DraftKings and FanDuel, two of the biggest DFS operators, shut down their paid contests in Ontario because of the local rules. Online poker games have shrunk as well under the province’s regulatory scheme, which requires operators to sign contracts with an agency called iGaming Ontario (iGO).
In other words, while Ontario sports betting and internet casino gambling has thrived under the province's regulatory scheme, the government sees room for improvement.
“Ontario’s closed liquidity model has discouraged some operators from seeking to offer games and sports betting in the province through iGO,” stated an affidavit from the agency’s general counsel, which was filed in connection with the court reference.
Grey market be gone
That could change if the Court of Appeal sees things the provincial government’s way. And this, the province argues, would help further one of the goals of Ontario’s competitive iGaming market, which is to pull players away from offshore and unregulated sites and get them gambling on locally regulated ones.
Ontario bettors would continue to access games using provincially regulated operators but their rivals outside the country would enter contests and sit down at online tables through their own local iGaming options. The province says players from other provinces in Canada would not be allowed into those games, unless those provincial governments and Ontario reach an agreement.
“Moving away from a closed liquidity model would ensure that iGaming remains an attractive option and would discourage Ontarians from using unregulated gaming sites,” Ontario’s Attorney General said in an October factum. “This approach would better protect the public by ensuring that the harms associated with online gambling are addressed and would provide for greater returns to the public purse.”
This sort of thing has also been done elsewhere, Ontario argues, such as an agreement among some European nations and U.S. states to pool liquidity for online poker. The province also noted that Canada’s Criminal Code allows locals to bet on horse races held and regulated outside the country.
No, thanks, we're good
However, a “no” from the five-judge panel would leave the status quo intact, to the chagrin of players who want to see tweaks.
Some interested parties would prefer the status quo. Among them is a group of government-owned lottery corporations that believe the Court of Appeal should reject Ontario’s proposal to pool online gambling liquidity with jurisdictions outside Canada.
These members of the Canadian Lottery Coalition (CLC) are concerned for a few reasons, some of which are connected to headaches caused for those companies by Ontario’s iGaming market.
While Alberta is moving toward a similar regulatory framework, no province but Ontario authorizes multiple private-sector operators of online sportsbooks and casinos to operate within its borders. That has created confusion among Canadian consumers outside of Ontario, who have been subjected to advertising by Ontario-regulated operators that are not authorized to do business in their province.
ICYMI: the B.C. government has withdrawn from Ontario's court reference regarding DFS/poker.
— Geoff Zochodne (@GeoffZochodne) September 23, 2024
The exit removes a potential opponent to Ontario's plan to allow online gamblers in the province to compete against players outside Canada:https://t.co/eSf3bogFZP @Covers
Even so, the CLC alleges some Ontario-regulated operators are doing business in other parts of Canada without local approval, using affiliated companies. The lotteries argue that business can come at their expense, costing them revenue that helps fund government services. If Ontario is allowed to go ahead with its plan for international liquidity, the lotteries are worried it may embolden illegal operators to continue offering their services throughout Canada.
In an October filing, the lotteries alleged their “undisputed evidence” shows affiliates of Ontario-regulated private operators are using their standing in the province as “a springboard” to promote their “illegal parallel” international sites to Canadians outside of Ontario.
“Although Ontario baldly asserts that Canadians outside Ontario would somehow be barred from participating under its ‘hypothetical’ scheme, no evidence supports that claim, and the record before this Court shows the opposite is true today,” said the Atlantic Lottery Corp., British Columbia Lottery Corp., Lotteries and Gaming Saskatchewan Corp., and the Manitoba Liquor and Lotteries Corp.
Much more has been argued in the written materials filed with the Court of Appeal. Some of the evidence prompted a fight between the interested parties over its relevancy and the allegations made against some Ontario operators. What's more, one of the previously approved interveners in the court reference, the British Columbia government, has withdrawn.
The Canadian Gaming Association, FanDuel and PokerStars-owner Flutter Entertainment PLC, the Mohawk Council of Kahnawà:ke (which launched the failed legal challenge of Ontario's iGaming regime), and iGaming consulting group NSUS have also filed factums with the appeals court.
Let's not lose focus
Ontario's attorney general filed a factum last week that suggests the province is trying to keep the reference focused on the question it posed to the court, and not wander down the road the lotteries are presenting.
“A reference is not a fact-finding exercise,” the province said. “Rather, the Court is confined to the question the Lieutenant Governor in Council has asked, including the set of facts provided as the basis for the question. Ontario does not have the burden of having to prove these facts. Parties in a reference are not permitted to raise new issues or other facts as they might in ordinary litigation.”
The province also argued that the court should steer clear from the CLC's allegations of illegal activity because the reference is not the "appropriate forum" to decide if that's the case.
"As the CGA and Flutter point out, there is no judicial finding anywhere in Canada that any of the purported affiliates have violated the Criminal Code’s gaming prohibitions," the province's reply factum said. "To accept the CLC’s claims, this Court would first need to decide them."
Yet the lotteries said in their reply factum they are within their rights to file the materials they have, “because constitutional challenges should not be determined in a factual vacuum.”
“Ontario did not simply rely on the Reference question and Schedule – it filed extensive evidence claiming (among other things) that under the proposed scheme, individuals outside of Ontario but within Canada would remain barred from iGO Sites and would be prevented from accessing affiliated international gambling websites,” the factum added.
All of the above and much more may be argued again, in person, before the Court of Appeal next week.
In October, the reference’s case management judge sketched out the time the province, the lotteries, and the other interveners will get for oral arguments.
Four hours will be set aside for the Attorney General of Ontario, four hours for the Canadian Lottery Coalition members, and 30 minutes apiece for the other interveners.
