An Ontario court proceeding trying to determine if it is OK for sports bettors, daily fantasy contestants, and poker players in Canada’s most populous province to compete against customers outside the country has veered into allegedly “sensitive” territory.
The Ontario government referred a question to the province’s Court of Appeal in February, asking if legal sports betting and online casino gambling would remain lawful if users could play and wager alongside individuals outside Canada.
That reference came after Ontario launched a competitive market for iGaming in April 2022, the rules for which prompted DraftKings and FanDuel to shutter their daily fantasy businesses in the province.
Online poker was curbed as well, as Ontario’s regulations require all iGaming participants to be in the province, shrinking the pool of potential players for Hold’em games and DFS contests.
The Ontario government is asking the appeals court if it would be all right to allow foreign players back into the province’s poker games and paid DFS contests, which are considered gambling under local law. The online gaming reference — and the question about “pooled liquidity” — is scheduled for three days of hearings before the Court of Appeal for Ontario in late November.
“Using poker as an example, a player in Ontario would be able to sit down at a virtual poker table and compete with players from around the world,” said George Sweny, vice president of regulatory affairs for a division of FanDuel-parent Flutter Entertainment PLC, in a May 31 affidavit filed in connection with the court reference. “Similarly, if daily fantasy sports were to be offered, an individual in Ontario could wager and participate in a daily fantasy sports league involving individuals from outside of Canada.”
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
Ontario is arguing this model is legal, and a favorable ruling from the appeals court could see daily fantasy operators such as DraftKings and FanDuel offer paid contests again in the province. It could also provide a boost to online poker games in Ontario, where operators sign contracts with a government agency, iGaming Ontario (iGO), to gain access to the market.
But the interested parties in the court reference (several entities have been approved as interveners) have clashed over what sort of evidence should be admitted as part of the proceedings.
Some of that evidence — and there are hundreds of pages in total, ranging from formal affidavits to screenshots to decades-old transcripts of debates in the Canadian Parliament — involve a contentious subject for some government-owned lottery corporations in Canada. And that, the lotteries say, is Ontario-regulated iGaming brands and sites associated with them allegedly doing business in other provinces without the approval of local authorities.
“iGaming Ontario Operators only permit individuals located in Ontario to play on their gambling websites,” says an affidavit of Sam MacLeod, assistant deputy minister and general manager of B.C.'s Gaming Policy and Enforcement Branch, filed in connection with the court reference. “However, when British Columbia residents access Ontario-based sites, some Operators redirect British Columbians to their international affiliate sites, even when they are accessed directly from iGaming Ontario’s site.”
The Gaming Policy and Enforcement Branch, the affidavit adds, “is concerned that an interpretation of the Criminal Code that would permit international player liquidity would further exacerbate the impacts of unregulated online gambling in British Columbia by further incentivizing international gambling websites affiliated with Ontario Operators to advertise and acquire players from British Columbia.”
Problematic paperwork
It’s these sorts of claims that prompted pushback during recent proceedings before the Court of Appeal. And the jousting over evidence suggests Ontario’s court reference may include a side plot regarding the current state of legal sports betting and iGaming in Canada, which still has a sizable “grey” or “black” market for online gambling, depending on your perspective and legal opinion.
The presence of unregulated operators was a driving force behind Ontario’s decision to launch a regulated and competitive iGaming market in April 2022 that has drawn dozens of operators to the province. Those operators under Ontario regulation can now conduct business there legally, via contracts with iGO. However, Ontario is the only province in Canada with such a system, and other jurisdictions are still grappling with sizable activity by entities that are not regulated locally.
Ontario filed a 745-page record in connection with the DFS/poker court reference on May 31. That was followed by the province of British Columbia and members of the Canadian Lottery Coalition (CLC) — the Atlantic Lottery Corporation, British Columbia Lottery Corporation, Lotteries and Gaming Saskatchewan, and Manitoba Liquor and Lotteries Corporation — filing their own proposed records.
It’s here that things got a bit contentious, according to a written decision last week from Court of Appeal Justice Katherine van Rensburg.
Ontario, Flutter, the Canadian Gaming Association (CGA), and iGaming consulting group NSUS opposed the admission of the B.C. and CLC evidence (consisting of five affidavits), arguing that, among other things, it was irrelevant to the question before the court and may lead to delays and complications.
“British Columbia and the Canadian Lottery Coalition Members argue that their proposed evidence is relevant to correct factual misimpressions left by Ontario’s evidence,” Justice van Rensburg wrote in the July 16 endorsement. “These misimpressions include that the proposed scheme would in fact bar players located outside of Ontario but within Canada from betting against players located in Ontario, and that the proposed scheme is analogous to or permissible under the regulatory schemes in various other jurisdictions.”
The CGA — whose members include Covers, as well as bet365, DraftKings, and Flutter, among other operators — also sought an order that would make some of the proposed records confidential, which the industry group called “the ‘Sensitive Evidence.’”
According to the decision, the CGA argued the evidence "could cause Ontario operators to suffer reputational harm, and that other operators identified by name in the Sensitive Evidence are not involved in the reference and have no opportunity to answer the allegations against them."
For example, the CLC member evidence includes claims that “iGO Operators or their affiliates comprise a large majority of the illegal online gambling offered in Canada outside Ontario.”
Names are named, which fueled the opposition to the evidence’s introduction. Justice van Rensburg granted a temporary sealing order on the documents ("so as to avoid rendering the CGA’s motion moot before it could be argued") and then held a hearing on the motion on July 5.
"The CGA asserts that there is an important public interest in limiting court openness when reputational and regulatory harm would result from unproven allegations against non-parties, especially in the reference context, which is not designed to permit the impugned non-parties an opportunity to respond," the judge wrote in a decision last week.
CGA president and CEO Paul Burns told Covers on Wednesday that the industry group defends its members and will continue to do so. He also said allegations about illegal conduct were “egregious” and an opinion, not a fact.
Those accusations have not been proven in court and their admissibility and relevance could be tested again in November.
"We wanted this to be about the question that Ontario put before the Court of Appeal and nothing more,” Burns said. “And that's why we chose to pursue what we did, because we didn't think it would be productive.”
In the public's interest
But the July 16 decision from the judge was to grant B.C. and the lottery coalition members permission to introduce their evidence “in its entirety,” rescind the temporary sealing order, and dismiss the CGA’s bid for confidentiality. The sensitive evidence is now publicly available on the Court of Appeal’s website.
Justice van Rensburg granted leave for B.C. and the lottery coalition members to file their proposed evidence for several reasons, including that it may assist the court in answering the reference question.
The judge also wrote that "the fact that some of the proposed evidence refers to alleged illegal or unregulated activities” was not reason enough to exclude it from the record.
“Arguably Ontario itself has opened the door to such evidence by adducing evidence about the existence of unlawful online gaming sites as part of the context in which the current [iGaming] scheme operates, and the avoidance of harms of unlawful or unregulated online gaming as a rationale for the proposed scheme,” Justice van Rensburg said in the decision. “As for the portions of the proposed evidence that identify specific operators by name, this reference is not about, and cannot result in, a determination of liability against any specific operator.”
The judge added that the “Sensitive Evidence” is mostly public already and that there was “little justification or purpose” in allowing it to be sealed.
“The CGA has not established that public access to the Sensitive Evidence would pose a serious risk to an important public interest,” Justice van Rensburg wrote. “The CGA did not provide any direct evidence of harm, but asserted instead that it would be reasonable to infer that allegations of criminal conduct could entail regulatory consequences for Ontario operators named in the Sensitive Evidence. The alleged regulatory or reputational harm is a private interest that would not justify an order limiting public access.”
Trust the process
Justice van Rensburg's order on July 16 also included that B.C. and the lottery coalition members could cross-examine Ontario's affiants (people who swore affidavits) and that Ontario, Flutter, the CGA, and NSUS could do the same of the B.C. and lottery affiants.
Lawyers involved in the court reference were given until this past Monday to advise whether they would seek to file responding evidence, as well as any other issues they would want addressed at a meeting next Monday.
Justice van Rensburg noted the concerns about additional delay or complexity being injected into the court reference, such as other parties trying to get involved “to protect their reputations and business interests,” the decision said.
“I am confident that these and any other procedural concerns that arise from the inclusion of the proposed evidence in the record can be addressed in the reference process that I am case managing,” the judge added.
The message many DFS players in Ontario have been dreading was sent out over the weekend.
— Geoff Zochodne (@GeoffZochodne) May 16, 2022
As was expected, DraftKings is planning to launch its online sportsbook in the province soon, and will block Ontario-based users from accessing DFS contests before that happens: pic.twitter.com/5Vk1xWPJ8E
Approximately $18.4 billion was wagered in the Ontario sports betting and iGaming market across 80 different sites during the quarter that ended June 30. That wagering is in addition to the iGaming business of the government-owned Ontario Lottery and Gaming Corp. (OLG).
However, some of OLG’s peers may be irked when they see Ontario-regulated brands in their backyards.
The CLC was formed in response to online sportsbooks and casinos promoting themselves in their respective jurisdictions, and it successfully sought to intervene in Ontario’s court reference because of concerns the outcome could lead to even more illegal online gambling within their borders. The Saskatchewan Indian Gaming Authority and Loto-Québec are also part of the lottery coalition but are not intervening in the court reference.
Moreover, as the judge noted, some of the grievances in the “sensitive” evidence have already been aired publicly.
“You have a selection of operators from Ontario that, while legally able to operate solely in that province, are conducting business elsewhere in this country,” said Will Hill, executive director of the Canadian Lottery Coalition, during a Senate of Canada committee hearing on June 5.
