A government agency is “the house” in Ontario’s competitive market for online sports betting, and the likes of DraftKings, FanDuel, and others are the province's to command.
So suggested a lawyer for iGaming Ontario on Wednesday, the second day of a hearing of a legal challenge to the province’s online gambling scheme.
iGaming Ontario, or iGO, is the government agency the province says is “conducting and managing” Ontario sports betting and the competitive gambling market for internet-based sportsbooks, casinos, and poker rooms.
While that assertion is being challenged in court, one of iGO’s lawyers was emphatic it is indeed the case during his submissions to Superior Court Justice Lisa Brownstone.
Private-sector operators sign contracts with iGO before legally taking wagers in Ontario. Through the provisions of that operating agreement, as well as other requirements, it is the province that is in control, iGO's counsel said Wednesday.
“The conductor of an orchestra never touches an instrument,” said Scott Hutchison, a partner at Henein Hutchison Robitaille LLP. “But the conductor is, at the end of the day, responsible for the symphony.”
A bittersweet symphony?
Wednesday wound up being the end of what was supposed to be a three-day hearing of the legal challenge. Justice Brownstone reserved her decision on the application, meaning it will come at a later date.
There is a lot at stake in the case, which Ontario wants dismissed. The province has become one of the biggest online gambling markets in North America since it launched its competitive iGaming framework in April 2022. It now allows multiple sportsbook and casino operators to take bets from residents in return for a cut of the revenue.
As a result, dozens of iGaming websites are legally available in Ontario, Canada’s biggest province by population, in addition to the online gambling offered by the provincially owned lottery and gaming corporation, OLG.
Indeed, billions are gambled monthly with private-sector operators, relying on a framework that no other province in Canada uses. For example, from October 1 to December 31, $17.2 billion was wagered through private-sector sports betting, casino, and poker sites in Ontario, according to iGO's figures for the quarter.
“No provincial government has ever done this,” said Nick Kennedy, a lawyer for the Mohawk Council of Kahnawà:ke (MCK), during the Tuesday portion of the hearing.
Cards on the table
The MCK is an Indigenous government organization that has long been involved in online gambling, including its regulation and operation. It is also the Quebec-based MCK that is challenging the constitutionality and legality of Ontario’s iGaming market, claiming it is harming their online gambling business and that it violates Canada’s Criminal Code.
The latter claim rests on the MCK’s allegation that it is private-sector operators, and not the province, who are conducting and managing the gambling in Ontario’s competitive market. Kennedy spent Tuesday presenting the council’s arguments to that end.
On Wednesday, the province and its lawyers were allowed to present their response and more to Justice Brownstone over several hours. While there is no definition of “conduct and manage” in the Criminal Code, and only so many past cases dealing with the term, Hutchison told the court that whatever the phrase is, it is more than just operating a gambling business.
“Conducting and managing… involves a more sophisticated, directive role, as opposed to having your actual hands on the cards, dealing them out at the table,” Hutchison said.
A one-sided deal
Hutchison said private-sector iGaming operators are administratively controlled by the Alcohol and Gaming Commission of Ontario (AGCO) and contractually controlled through their agreements with iGO. He added that under the contract, the operators are agents of iGO who can be sanctioned by the province if necessary. The contract also purportedly gives the province the final say over customer disputes and what games are offered.
“This is not an agreement between equals,” Hutchison told the court. “This is a one-sided document in terms of control and authority in relation to what these agents will do on behalf of the principal.”
The MCK pushed back against the argument that iGO’s contractual ownership of all revenue generated by iGaming contributes to conducting and managing online gambling, noting the agency is also obligated to hand over around 80% of that revenue to operators. Hutchison, however, said ownership of the money is legally important.
“iGO is the house,” he told the court. “iGO is the counterparty to the wager in the context of that bet.”
Despite being scheduled for three days, the hearing for this challenge wrapped up this afternoon, with the judge reserving her decision for a later date.
— Geoff Zochodne (@GeoffZochodne) February 21, 2024
I will have a story soon, but could be a bit before we get a ruling on the legality of Ontario’s competitive iGaming market. https://t.co/BCKtsY4dN6
Hutchison also argued against several other points raised Tuesday, such as iGO allegedly duplicating some of the regulatory functions of the AGCO.
He suggested that the AGCO and iGO could have had different views on the use of athletes and celebrities in iGaming advertising, which is perhaps why the AGCO acted publicly on the matter and iGO did not, at least not first.
“The fact the regulator acted is enough to show that what we’re performing is a different function,” Hutchison said.
Lawyers for the Attorney General of Ontario also weighed in on Wednesday on the legal challenge, echoing Hutchison on some points about the power the province has over operators.
“It is not simply a figment or a mirage,” said Ananthan Sinnadurai. “Ontario can assert extensive control.”
Josh Hunter, a member of the AG's constitutional law branch, tried to defuse the allegation that federal lawmakers envisioned "lottery schemes" as more along the lines of state lotteries. He did so by pointing to a speech made by then-Justice Minister John Turner in 1969, when the federal government of Pierre Trudeau was overhauling criminal law.
“He meant games of chance generally,” Hunter said.
Let's get legal
The AG’s lawyers also dug into some of the technical aspects of the case. Those included whether the MCK has a genuine stake in the outcome and whether the court should issue a declaration like the one the council is asking for while iGaming operators are not even parties to the matter.
The MCK, the attorney general said in its factum, is asking the court to declare that the province’s iGaming operators are “committing serious criminal offences,” because it would also declare they are violating the Criminal Code.
“The declaratory relief requested by the Applicant could undermine an entire sector of the gaming industry in Ontario that, in its first year, sustained more than 12,000 full-time equivalent jobs,” the AG’s office said, adding that the court should not grant the declarations.
Moreover, unlike the MCK, the provincial attorney general's office argues the judge should note the absence of the federal government in the case.
In doing so, they pointed to a section of a Supreme Court ruling last year, which repeated a line from an earlier case: "the Court should be particularly cautious about invalidating a provincial law when the federal government does not contest its validity."
Rebuttal?
Kennedy gave a brief reply on the government's points before the court adjourned on Wednesday, including by arguing that iGO is not actually "the house," as it will not refund or settle bets.
He also took aim at Hutchison's symphony analogy, saying iGO is more like someone who hires the musicians rather than the conductor, who tells the orchestra what notes to hit.
“iGO is not doing that," Kennedy said.
This story has been updated from its original version to include the name of Hutchison's law firm.
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