If daily fantasy sports and poker players from Ontario were allowed to play against competitors outside Canada, there might be one game, but two or more regulatory systems involved.
This, the Ontario government argues, is a key part of what would make paid DFS contests and online poker games played against opponents from abroad legal.
While liquidity would be pooled for the games, Ontario players would be under the province's regulatory umbrella and foreign players under their versions of local oversight.
“Our position is the game is two schemes interacting with each other,” said Josh Hunter, a lawyer for Ontario’s Ministry of the Attorney General.
Let's get ready to reference...
— Geoff Zochodne (@GeoffZochodne) November 22, 2024
The Ontario government's big question about daily fantasy sports, poker, and iGaming in the province and beyond will have its day in court next week:https://t.co/AZdkbVadp4 @Covers
Hunter was speaking in a downtown Toronto courtroom on Tuesday, the first of three scheduled days of arguments for the Ontario government’s reference to the province’s Court of Appeal regarding online gambling, DFS, poker, and pooled liquidity.
The Ontario government referred a question to the Court of Appeal in February asking if it would be legal for iGaming users in the province to play games against people outside of Canada in a certain way. If not, the provincial government wants to know to what extent that scheme would be illegal.
Ontario’s court reference could have major consequences for DFS and online poker, two iGaming offerings that took a hit when the province launched a new regulatory system for online gambling in April 2022.
That system requires all participants to be in the province and thinned the potential pool of players, which shrank poker games and prompted DFS operators to shutter their businesses in Ontario.
DraftKings and FanDuel, for example, now offer Ontario sports betting and online slots and table games in the province. However, they closed their DFS operations in Ontario more than two years ago in response to the province's regulations.
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
New legal ground is being broken with the reference, but the Ontario government's proposal could also revive paid DFS contests and expand the pool of opponents for local poker players.
When the hearing wraps up later this week, a decision will likely be issued weeks or months later, which could outline what Ontario and its iGaming operators can and can’t do.
Some argue Ontario’s proposed model should not be allowed in Canada, including several government-owned lottery corporations and an Indigenous government group with longstanding ties to online gambling, the Mohawk Council of Kahnawà:ke (MCK).
The Atlantic Lottery Corp., British Columbia Lottery Corp., Lotteries and Gaming Saskatchewan Corp., and Manitoba Liquor and Lotteries Corp. are particularly concerned with what they allege are affiliates of Ontario-regulated operators already using their regulated status in the province to attract customers from other parts of Canada.
“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,” the lotteries said in their factum to the court.
The MCK, meanwhile, unsuccessfully challenged the legality of Ontario’s new iGaming model – wherein dozens of private-sector sites and operators are permitted to take bets from residents – and is now opposing the province’s proposal to find liquidity abroad.
“Section 207(1)(a) [of Canada’s Criminal Code] imposes a territorial limitation on provincially conducted and managed gaming,” the MCK argued in its factum to the Court of Appeal. “Gaming must be ‘in’ the applicable province to be lawful under s. 207(1).”
Stay on target
Ontario and its allies in the court reference want the judges to stay focused on the question that was asked.
On Tuesday, Hunter said that question does not touch on the legality of Ontario’s iGaming scheme overall – which was ruled on earlier this year by an Ontario judge – whether Canadians from outside Ontario can participate, or what affiliate companies of Ontario-regulated operators are doing in other parts of Canada.
“Whether these corporations are currently complying with the Criminal Code elsewhere in Canada has no bearing on the narrow question of whether the Proposed Model, as a question of law, would be lawful under s. 207(1)(a) of the Criminal Code,” the province said in its reply factum to the court.
Hunter added Tuesday that no one has been charged or found in violation of the Criminal Code in this regard. And while Ontario disagrees with the limits suggested by the MCK, it knows what it cannot do is run an online poker game in another country.
The province’s plan would include keeping local players under Ontario-based regulation and consumer protections while linking them to foreign players who would remain under foreign oversight.
“It is a separate scheme being operated outside of Ontario,” Hunter said.
Made in Ontario
Under the model proposed by the provincial government, Ontario players would continue to use sites regulated and made available by the Alcohol and Gaming Commission of Ontario (AGCO) and iGaming Ontario. The big change would be that, once on those sites, players could participate in games populated by rivals from inside the province and outside the country.
Ontario players would still be subject to the province's rules for iGaming. Would-be bettors must be 19 or older, comply with sign-up and identification requirements, and receive their winnings from Ontario-regulated entities.
Ontario could also decide which jurisdictions its players could connect to – such as countries or U.S. states the province deems reputable or that have the most appropriate regulations.
Therefore, Ontario could negotiate agreements that require certain standards from the operators or regulators it partners with for international liquidity, the province’s lawyers suggested on Tuesday. And if those conditions aren’t met, there would be no agreements allowing for pooled play.
It’s these types of controls that Ontario hopes will help persuade the five-judge panel about the legality of its proposal. Canada's Criminal Code states it is legal for a provincial government to offer gambling "in that province," and so Ontario is taking care to show the Court of Appeal the extent to which there is a “real and substantial connection” to Ontario.
Potentially big news for Ontario-based daily fantasy and poker fans: the provincial government is asking the Court of Appeal whether allowing residents to participate in online games and betting involving people outside of Canada is legal. https://t.co/sv2ouYlVQY pic.twitter.com/Eanx9zgAS0
— Geoff Zochodne (@GeoffZochodne) March 12, 2024
So while Ontarians may be able to connect with opponents in another country, via agreements between iGaming Ontario and foreign operators or regulators, the province's players would be under its “lottery scheme."
The other participants will be contained within the foreign lottery schemes.
“There is no real and substantial connection to another jurisdiction,” argued Hera Evans, another lawyer for the Ministry of the Attorney General, of Ontario’s model.
Going after the grey
Ontario’s rationale for its proposed model includes one of the reasons it launched a competitive iGaming market in the first place, which was to pull provincial punters from offshore and illegal sites onto provincially regulated ones.
Those provincially regulated options now include bet365, BetMGM, DraftKings, FanDuel, and more than 40 other operators. Polling also suggests a large majority of online gamblers in Ontario now use those regulated options.
By allowing operators to provide bigger poker games and paid DFS contests, Ontario could pull even more players onto its regulated iGaming sites.
“We believe it would better protect the people of Ontario,” said Ananthan Sinnadurai, another counsel for the AG’s office, later in the hearing.
What about us?
There is a looming question about what all this means for the rest of Canada, which would be boxed out of these games involving Ontario players and their counterparts abroad.
While Ontario is proposing to link up with jurisdictions like New Jersey, Nevada, or Singapore, the question to the Court of Appeal is mum about Alberta, British Columbia, or Quebec.
That is because, as Ontario and its lawyers have acknowledged, Canadian law restricts provinces from running gambling operations that involve players in another province – unless that other province agrees.
Those iGaming-related interprovincial agreements do not exist between Ontario and others at the moment, but they could in the future, especially with some incoming legislative changes.
A budget bill passed earlier this month in the Ontario legislature includes a new iGaming Ontario Act that makes iGaming Ontario a standalone corporation and not a subsidiary of the AGCO.
In the province, online sports betting and internet casino gambling operators must enter into contracts with iGaming Ontario before they can begin taking bets. Those contracts provide the government agency with the final say over a lot of what operators can do, such as the games they can offer.
The new legislation also specifies that iGaming Ontario can enter into gambling-related agreements with other provincial governments, subject to the approval of the Ontario government.
Nevertheless, it would be up to Ontario and iGaming Ontario to negotiate and execute any of those agreements. And any Ontario player who enters a DFS contest or sits down at an online poker table with opponents provided via one of those agreements would still be subject to all of Ontario’s oversight and consumer protections.
“Ontario decides who can play in Ontario, which games may be offered in Ontario, how wagers and payouts will work in Ontario, even what happens to every penny of gross gaming revenue earned in Ontario,” said Adam Goldenberg, a lawyer for McCarthy Tétrault LLP, who appeared on behalf of the Canadian Gaming Association (CGA) on Tuesday.
Ontario and the CGA (which supports Ontario’s interpretation, and whose members include bet365, Covers, and DraftKings, among many others) were the two parties to make arguments on Tuesday for the province's court reference. Still to come are FanDuel and PokerStars-owner Flutter Entertainment PLC, the MCK, iGaming consulting group NSUS, and the Canadian Lottery Coalition members.
The hearing for Ontario’s reference will continue Wednesday before the Court of Appeal. It is scheduled to run until Thursday.
