Is Ontario running “the most comprehensive illegal gaming regime Canada has ever seen?" It’s a question a judge could consider in the not-too-distant future, and it is hugely important for the province’s army of privately owned online sports betting sites.
Lawyers for the Ontario government and an agency responsible for the province’s competitive online gambling market are scheduled to be in court next week to defend the regulatory framework.
That agency, iGaming Ontario, wants the Ontario Superior Court of Justice to dismiss an application by the Quebec-based Mohawk Council of Kahnawà:ke (MCK) that could shutter the iGaming regime.
The scheme, the MCK alleged in court documents, is illegal because it is not the province "conducting and managing" the gambling, which is allowed by federal law, but rather private-sector operators.
“The Applicant now asserts that the igaming regime is invalid,” write lawyers for iGaming Ontario, or iGO, in a recent court filing. "The argument is that Ontario is running perhaps the most comprehensive illegal gaming regime Canada has ever seen.”
Potentially big for sports bettors: The Mohawk Council of Kahnawà:ke says it intends to challenge the legality of Ontario's reading of the Criminal Code's gambling provisions in court.
— Geoff Zochodne (@GeoffZochodne) November 29, 2022
Ontario used that reading to launch a new iGaming market in April.https://t.co/VriEAkUXg6 pic.twitter.com/koebmhqPz5
But not so, says Ontario, which wants the MCK's application dismissed.
“In sum, iGO controls the games, the money, the data, the advertising, and retains ultimate discretion over conduct and management,” the agency's Jan. 19 factum said. “In these circumstances, iGO, as Ontario’s agent, must be conducting and managing the igaming regime in the province.”
Yet in December, the MCK, an Indigenous government organization with ties to the online gambling industry, reiterated that it believes the actual conducting and managing in Ontario's iGaming market is the duty of private operators.
"This is because, among other things, operators own their websites and gaming data, select and operate the games, set wagers and payouts, collect money from players, select target markets, advertise, manage their businesses, and retain 80% of the profits," the MCK's factum said. "At best, IGO is akin to a regulator."
The council is asking the court to declare that the games offered in Ontario's iGaming market are being conducted and managed by operators, not iGaming Ontario. The MCK also wants the court to declare that the legislative and regulatory provisions underpinning Ontario's market have no effect.
The made-in-Ontario model
While it may be an open-and-shut case to the province and MCK, time will tell if a court sees it similarly. There is a lot at stake if they do not.
For starters, Ontario is the only province in Canada that has invited multiple private-sector operators of online gambling sites to do business within its borders. A court shooting down the scheme might undo it and deter other provinces from following suit.
Furthermore, billions of dollars are being wagered in Ontario's competitive market every month via dozens of private-sector sports betting, casino, and poker websites.
From October 1 to December 31 of last year, $17.2 billion in wagering occurred in the province through 72 private websites and approximately 1.2 million active player accounts.
There is nothing else like it in Canada. And, when you include its provincial lottery and gaming corporation, Ontario has become one of the biggest online gambling markets in North America since launching its competitive iGaming scheme in April 2022.
So, again, next week’s hearing could be a high-stakes affair, both figuratively and literally. iGO, though, maintains its scheme is sound.
Two key words
While the Alcohol and Gaming Commission of Ontario (AGCO) regulates online gambling in the province, iGO, an AGCO subsidiary, is supposed to be legally responsible for all that betting and wagering through contracts with private operators. Those operators, iGO's factum says, "act as iGO's agent in delivering online games to the public."
The document includes a history of how Canadian gambling law has evolved. It even dives into what the definition of “conduct and manage” may truly mean, stating that the “grammatical and ordinary meaning of both words suggest that they refer to high-level oversight.”
In short, iGO's filing argues that the province's online sports betting and iGaming scheme is consistent with the relevant provisions of Canada's Criminal Code.
To back up its argument, the agency's factum points to the code's section that allows provinces to conduct and manage gaming "in accordance with any law" enacted by the legislature.
“This section permits provincial governments to establish, regulate, and oversee gaming regimes, but it does not require them to directly operate every facet of them,” the factum states. “What matters — and what has always mattered to Parliament — is that provinces have sufficient control to mitigate the perceived harms that can result from gaming. Thus, a province is ‘conducting and managing’ a gaming regime when it provides sufficient oversight necessary to control the risks associated with the regime within its borders, even if it chooses to leave day-to-day operational decisions to its agents.”
Ottawa still absent
iGO contends it is conducting and managing online gambling on behalf of the province by contracting with operators and controlling the games they offer, the revenues and data they generate, and setting various rules the private companies must follow.
The agency even has a say in the marketing campaigns that have driven some Ontarians crazy. An operator that fails to follow iGO’s guidelines, including that they advertise only with “responsible campaigns,” could find itself booted from the province’s iGaming market, iGO's factum says.
The province considers the gambling in the iGaming market as being conducted and managed by iGaming Ontario, a new government agency. Operators must sign contracts with iGO before they can launch in the market, making them kind of like partners. https://t.co/renvUAVtGg pic.twitter.com/3Ucq8uuuVi
— Geoff Zochodne (@GeoffZochodne) November 29, 2022
Meanwhile, the MCK factum highlighted various ways in which the council sees private operators controlling themselves in Ontario, such as how they tout themselves to the public.
This, the council said, includes an admission from iGO that it "played no role in one operator’s decisions to hire Wayne Gretzky, Kevin Garnett, Connor McDavid, and Jaimie Foxx [sic] as spokespersons."
Another supporting argument offered by the province is that the federal government has not intervened against Ontario in the matter.
According to iGO, the MCK wrote the Attorney General of Canada in May 2022, asking them to challenge the legality of Ontario's iGaming scheme in court. The factum added that the federal government has not done so.
“Multiple Notices of Constitutional Question have since been served,” iGO’s factum states. “But the Attorney General of Canada — the party responsible for defending Parliament’s laws and jurisdiction against incursion — has not joined the Applicant on any of the issues it has raised.”
What's old is new again?
The provincial government is also arguing one of the declarations the MCK wants — that the Ontario government does not "conduct and manage" the iGaming in the province's new market as required by federal law — should be rejected.
This, the province says, is because it would either improperly interfere with the exercise of prosecutorial discretion or would be an unenforceable judicial opinion.
“In other words,” iGO’s factum states, “the declaration sought serves no purpose, and for that reason it should not be granted.”
Before the provincial government launched its competitive iGaming market, the government-owned Ontario Lottery and Gaming Corp. was the sole legal provider of online gambling in the province.
OLG also contracts with private-sector companies to operate its brick-and-mortar casinos on a day-to-day basis, iGO notes, such as Caesars Entertainment Inc.
“As the OLG does with private casinos, iGO enters into Operating Agreements with operators,” the factum says.
Without those agreements, some online gambling operators may still be taking bets in Ontario without authorization from the AGCO or iGO, and while paying nothing to the government.
This was one of the reasons why the province announced plans to launch a regulated iGaming regime, which first happened back in 2019.
“By this time, various types of unregulated internet gaming options from outside the province were readily available to Ontarians, but, with the exception of OLG’s PlayOLG platform, they were not conducted and managed by the province,” the factum states. “This regulatory lacuna meant that these websites were not subject to any meaningful domestic control, oversight, regulation, or review.”
Now, iGO says online gambling in Ontario is sustaining more than 12,000 full-time equivalent jobs and that it contributed almost $1.6 billion to the province's economy in the first year of the competitive framework.
"iGaming Ontario will defend against MCK’s legal challenge in an Ontario Superior Court hearing next week and we are confident that our model meets the requirements of Canada’s Criminal Code," the agency told Covers on Wednesday.
Deloitte Report: New iGaming Market Contributes High-Paying Jobs and Strong Economic Benefits to Ontario. Full Details: https://t.co/jLeN1wxO0A pic.twitter.com/XhkKS4Y5QE
— iGaming Ontario (@iGamingOntario) June 14, 2023
But for all the good Ontario’s iGaming scheme may be doing for the province, the MCK has argued it is damaging the economy of Kahnawà:ke, a community about 20 minutes away from Montreal, Quebec.
The Mohawk have longstanding connections to the online gambling industry, including their own gaming commission, but say the Ontario system threatens that business.
This, the council said, is because Ontario now prohibits online gambling entities licensed by other regulators (like the Kahnawà:ke Gaming Commission) unless those companies are also registered with the provincial authorities.
Moreover, a November 2022 press release from the council said it made “numerous attempts” to discuss Ontario’s iGaming scheme with provincial officials and Canada’s justice minister.
However, “neither has been prepared to engage in meaningful discussions with the MCK to reconcile and accommodate Kahnawà:ke’s unique interests in the gaming industry," the release said.
The old days
With those interests at stake, the MCK said it felt the legal basis for Ontario’s iGaming market needed to be challenged in the courts.
Those legal concerns have been echoed by the Auditor General of Ontario, who warned the province's iGaming model handed a lot of "strategic decision-making power" to private operators.
“The plain facts are that Ontario has implemented an iGaming scheme, which is based on a very tenuous legal foundation, that is causing a significant loss of revenues for our community,” MCK elected Council Chief Michael Delisle Jr. said in the 2022 release. “Until Ontario sought to impose its ill-designed reinterpretation of ‘conduct and manage’ on operators and service providers, Kahnawà:ke was able to successfully operate across Canada in a regulated manner.”
The annual report from Ontario's auditor general contains a follow-up to the 2021 audit of the province’s plans for online sports betting/internet casino gambling.
— Geoff Zochodne (@GeoffZochodne) December 6, 2023
In short: the AG's office is still not thrilled with design and implementation of the competitive iGaming market.
As a result, the MCK also wants the "enabling provisions" of Ontario's iGaming market declared "inoperative to the extent they enable" the scheme, as that is allegedly inconsistent with the federal limits on gambling.
"Paramountcy renders the provincial laws inoperative to the extent of the inconsistency," states the factum filed by the council's lawyers. "The Enabling Provisions cannot be saved through a narrowly tailored declaration of inoperability. Instead, they must be declared inoperative since they were designed to, and do, enable a scheme that is inconsistent with the Criminal Code."
But the Attorney General of Ontario said in its factum in January that the court should not provide the declarations the MCK is seeking.
This is "because the Applicant does not have a genuine interest at stake in this matter; because the Court lacks jurisdiction to grant a declaration as a result; because declaratory relief would undermine the administration of justice; and because parties who would be affected by a declaration on the merits are not parties to this proceeding," the factum states.
"The Applicant has not met its burden of proving any conflict between the iGaming scheme and the Criminal Code," the document adds.
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