Ontario’s army of poker players and daily fantasy aficionados could soon be part of something historic — but only if a group of judges in Canada’s most populous province give the go-ahead.
Lawyers for the Ontario government, provincial lottery and gaming corporations, and several other players in the online gambling industry spent three days this past week making their cases for and against that potentially historic change in a downtown Toronto courtroom.
The hearing was part of an Ontario government reference to the provincial Court of Appeal. The reference aims to find out if it is legal to allow local players to compete in peer-to-peer games such as online poker and paid DFS contests against rivals from outside Canada.
The end of an era in Ontario, as DraftKings has now shuttered its daily fantasy contests in the province ahead of its online sportsbook launch. pic.twitter.com/KhDINN7Tcu
— Geoff Zochodne (@GeoffZochodne) May 17, 2022
Ontario’s DFS and poker scenes took a hit when the province launched a competitive iGaming market in April 2022. The rules of the new market mean that while there is plentiful sports betting and iGaming in Ontario, there are no provincially regulated options for paid DFS contests and a limited pool of poker players.
The bid to change that fact represents a new legal issue (hence the government's reference to the appeals court), so the still-to-come decision in Ontario will set a precedent that may ripple across Canada. However, the Court of Appeal’s opinion may not be the final word in the matter either, as it’s possible there could be an attempt to elevate the issue to the Supreme Court of Canada.
At any rate, a lot was said during the three days of submissions before the Court of Appeal's five-judge panel. Here are some of my takeaways from what could very well be a history-making proceeding:
Made in Ontario, with foreign parts
This week’s hearing provided a better understanding of how, exactly, Ontario would link its poker and DFS players to ones located outside of Canada.
What the judges heard was agreements would be struck by Ontario and the government agency legally responsible for online gambling in the province, iGaming Ontario. Those agreements would be with regulators and operators abroad, setting out the rules of the shared games, such as the minimum age for participation.
There’s also the possibility Ontario could make connections at the operator level, contracting with individual companies to obtain the consumer protections the province wants for its players. Those operators could have clients based all over the world.
While the FSGA welcomes the regulation of single-event sports wagering in Ontario, the regulations have unfortunately made operating paid fantasy sports contests in the province impossible for almost every operator.
— FSGA (@FSGAtweets) March 28, 2022
Read the release: https://t.co/fSWc7c3YGI
All of this is to be determined, but what Ontario and its lawyers stressed to the court is that the province will have the same kind of control it has over operators at home as it will over poker games involving players from abroad. Ontario players will use Ontario-regulated sites, subject to Ontario-made regulations, and could then play in games with Ontario-like rules.
Using this method, Ontario sees itself as having the necessary control over the proceedings to meet the threshold for legally conducting gambling.
“In order to open that door, Ontario has to agree to all the rules, all the protections that are being provided,” said Josh Hunter, a lawyer for Ontario’s Ministry of the Attorney General, on Thursday.
Now, once upon a time, there was no need for any of these agreements, because Ontario didn’t have the sort of regulated market it does now.
Before April 2022, online gamblers in the province freely participated in a “grey” market for iGaming, wherein they could access a cornucopia of websites that might have been licensed and regulated in, say, Malta, but not in Ontario itself. There was also a site run by the government-owned Ontario Lottery and Gaming Corp., yet most online gambling was happening in the grey.
That changed when Ontario launched its new iGaming market in April 2022, giving private-sector operators the chance to come under provincial regulation.
Now, the majority of online gambling in Ontario takes place on provincially regulated sites with well-known names like bet365, DraftKings, and FanDuel. Those operators just don’t have paid DFS contests or the massive poker tournaments Ontario players used to have access to via the grey market.
The court reference and decision from the appeals judges could change that fact.
Furthermore, while Ontario is proposing to do something that may be without precedent in Canada, it’s not unprecedented everywhere.
One good example is in the United States with the Multi-State Internet Gaming Agreement (MSIGA). The compact connects online poker players in Delaware, Michigan, Nevada, New Jersey, and West Virginia, allowing for bigger games and tournaments in those states. Ontario could try to link up with those states as well.
But what about inside Canada?
It’s worth noting that Ontario’s question to the Court of Appeal asks about “individuals outside of Canada,” but not inside of Canada.
There is a good reason for this, made clear by Canada’s Criminal Code, which sets out what provinces can and can’t do when it comes to gambling.
The code says it is legal “for the government of a province, either alone or in conjunction with the government of another province, to conduct and manage a lottery scheme in that province, or in that and the other province, in accordance with any law enacted by the legislature of that province.”
It’s a mouthful, but roughly translated, it means a province can conduct gambling within its borders. A province can also do so in another province as long as it has permission from that other province.
In other words, Ontario already knows it could pool iGaming liquidity with other provinces (i.e. poker and DFS games with players from Ontario and other provinces). It just needs to ask permission.
Ontario hasn’t formed those kinds of partnerships yet. However, they could be coming.
As was highlighted during this week’s hearing, the Ontario legislature recently passed a bill that contains provisions related to iGaming Ontario (iGO), the province’s iGaming agency.
Bill 216 will make iGO a standalone corporation, rather than a subsidiary of the Alcohol and Gaming Commission of Ontario (AGCO). What’s more, it empowers iGO (with the government’s permission) to enter into gambling agreements with other provinces.
So, even if Ontario strikes out at the Court of Appeal on international liquidity, the province could find a way to obtain more within Canada itself. Will that be enough to return paid DFS contests to the province? I don’t know, but, at the very least, it could expand the pool of players for Ontario’s DFS and poker games.
How “illegal” is “illegal” anyway?
Even though Ontario is trying to keep the question of interprovincial gambling out of its question to the Court of Appeal, it got brought up anyway during this past week’s hearing.
Perhaps the most interesting reason for this was arguments made by lawyers for members of the Canadian Lottery Coalition (CLC). The government-owned entities are worried about Ontario’s plan for fear it could help the competition: “grey” market operators.
The CLC members say online sports betting and casino gaming sites based outside their provinces and abroad are taking action from users in their provinces, diverting revenue away from the lotteries that could be spent on government services. Moreover, the CLC members have alleged that some entities are affiliated with Ontario-regulated operators.
In the eyes of the non-Ontario lotteries, this is illegal. Canada's Criminal Code has a broad prohibition against gambling with certain exceptions made for provinces, charities, and other specified entities.
So, while Ontario says it will not be pulling customers from other parts of Canada into its Ontario/international poker games and DFS contests, the CLC members are not taking the province at its word. To them, they see Ontario doing little to stop companies affiliated with Ontario-regulated entities from already conducting gambling within other provinces.
Yet one interesting question raised by the Court of Appeal hearing was, well, are these operators actually operating illegally?
Henein Hutchison Robitaille LLP's Scott Hutchison, appearing on behalf of FanDuel and PokerStars-owner Flutter Entertainment PLC, said during the hearing that “no Canadian court has ever said that that business model is unlawful,” and that he was unaware of one even being asked.
This has been the position of the Canadian Gaming Association as well, whose members include bet365, Covers, DraftKings, Flutter, and many others.
“The lottery corporations’ factum states — and restates, and restates again — a number of erroneous assertions impugning the allegedly ‘illegal operations’ of international gaming operators (which are not licensed or regulated by iGaming Ontario),” the CGA said in its factum to the court. “These allegations are unfounded as a matter of law. They have never been established in any Canadian court, let alone beyond a reasonable doubt.”
Whether the Court of Appeal wades into this in its opinion remains to be seen. Ontario and some members of the gaming industry would likely prefer the court not to go there. If the judges did weigh in, those words could be repeated in another setting, such as a lawsuit.
While the lotteries have not launched such a lawsuit yet (and, as one of their lawyers suggested, that could be pointless anyway given the offshore nature of the online gambling industry), they have sent cease-and-desist letters to some operators. Again, we shall see what ultimately gets written by the court.
Known unknowns
To that last point, we don’t know how the Court of Appeal will rule.
Maybe it will agree with Ontario. Maybe it won’t. Maybe some judges will agree. Maybe others won’t. Trying to read between the lines of what judges were asking about and saying is tricky.
The hearing for Ontario's court reference regarding DFS/poker/iGaming/pooled liquidity — which asked if it's legal for provincial bettors to play with users outside Canada — has wrapped up. The five-judge panel for the Court of Appeal reserved their decision for a later date.
— Geoff Zochodne (@GeoffZochodne) November 28, 2024
So we don’t know what we don’t know. We also don’t know when the Court of Appeal will render its opinion. Based on another recent reference, regarding federal “carbon tax” legislation, it could take months. However, these are two different subjects, so maybe it could take less than that. Maybe it could take more. I have no idea.
… but this might not be over
Which brings me to my last point.
When the Ontario government didn’t get the answer it wanted from the Court of Appeal on the federal government’s Greenhouse Gas Pollution Pricing Act, it took the matter to the Supreme Court of Canada for a second opinion.
Ontario could appeal to the Supreme Court again if the Court of Appeal shoots down the province’s proposal.
All of this is to say that we could be in for a long wait before this debate is settled.
There are DFS players in Ontario who are dying for paid contests to return. They might. They might not. We’ll all just have to wait and see what happens next.
