An Ontario government agency responsible for the province’s plethora of online sports betting sites has vowed further action against illegal operators.
The Alcohol and Gaming Commission of Ontario (AGCO) recently published its annual report for the period covering April 1, 2021, to March 31, 2022, the latter of which was only days before the province launched a new internet-gambling market.
That new market flows through an agency called iGaming Ontario (iGO), which enters into operating agreements with companies allowing them to offer legal sports betting and casino gaming over the internet in return for an approximately 20% cut of their revenue.
The AGCO’s annual report contains iGO’s first annual report as an appendix, as iGO is technically a subsidiary of the AGCO. And within iGO’s report (which covers the period from July 6, 2021, when it was created, to March 31, 2022) is a pledge by its chairman to ratchet up the pressure on illegal gaming operators to help the new Ontario sports betting market.
“We anticipate more [legal] operators joining the market in 2023, growing the economic benefit and revenue stream for Ontarians,” iGO board chair Dave Forestell wrote in the report. “We will also ensure that the investments made by legal operators are protected and valued by taking further efforts to crack down on the illegal market. Illegal operators do not share revenue with the province and are not governed by our strict rules around responsible gambling, anti-money laundering, or player protection.”
'One of the world’s largest'
The fight against the illegal market will be a “significant focus” for iGO, Forestell continued, as he said a crackdown on illicit operators is necessary for the legal market to succeed.
“It has been a very successful launch, with hundreds of thousands of Ontarians participating in our highly competitive market,” the chair added. “However, the work does not stop here, the future is bright for Ontario and by listening to operators and players we will learn, grow, and do our best to serve the interests of Ontarians.”
The comments about the illegal market suggest there are some lingering bad actors in the province that have not escaped the notice of iGO and the AGCO. The presence of those actors could be siphoning away some of the revenue Ontario could be receiving from its regulated iGaming market, which remains the only one of its kind in Canada.
Ontario’s competitive iGaming market opened its digital doors on April 4, 2022, allowing multiple private-sector operators of online sportsbooks and casinos to legally take bets in Canada’s most populous province. Before that, the government-owned Ontario Lottery and Gaming Corp. had been the only legal provider of iGaming.
More than 70 gaming websites are now operating within Ontario’s regulatory framework. According to iGO, more than $11.5 billion was wagered on the province's legal sites from Oct. 1, 2022, to the end of the year, generating $457 million in revenue from hundreds of thousands of player accounts.
“That market, in a few short months, has quickly become one of the world’s largest regulated igaming jurisdictions and is on track to deliver real revenue to the province,” iGO executive director Martha Otton wrote in the annual report. “We expect these numbers, across the board, to continue to grow.”
Ah, the latest numbers for Ontario's competitive market for online sports betting and casino gambling are out. For the three months ended Dec. 31, iGaming Ontario says players placed $11.5B in wagers (CAD), which generated $457M in revenue. https://t.co/x3ZFFagHeU pic.twitter.com/dwtGXzP0YG
— Geoff Zochodne (@GeoffZochodne) January 26, 2023
The success of Ontario’s iGaming framework is due in part to its approach of transitioning operators who previously took bets from residents in the “grey market” — licensed by an offshore or out-of-province entity but not the province itself — into its regulated market. Bookmakers such as bet365, which were available to Ontario residents before the iGaming market launched, are now registered with the AGCO and have operating contracts with iGO.
It was the robust grey market activity that helped nudge the Ontario government toward creating its regulated iGaming market, which would provide it a cut of the proceeds and allow it to apply its rules and standards to the industry. Transitioning bettors and bookmakers into the regulated market was a significant step for the AGCO and iGO.
“iGO worked with government and prospective operators to create market conditions that supported economic development, addressed the unregulated grey market, and captured new provincial revenues,” the agency’s annual report notes.
Part of the transition process allowed "grey" operators to stay in business in Ontario until they completed all the regulatory steps to launch in the regulated market.
No more play for Mr. Grey
Ultimately, though, the patience of the AGCO and iGO came to an end, and on October 31 of last year, new rules came into effect requiring operators to cease all unregulated activities, even if they were applying to enter the regulated market. Failing to do so could risk a company’s eligibility to enter the regulated market.
"iGO will continue to onboard operators that drive players to the regulated market," the agency told Covers in an email on Wednesday. "iGO promotes the benefits and protections to players via online and social media efforts to encourage them to only play on regulated sites and avoid unregulated offerings. iGO also continues its work with the AGCO, media outlets and industry associations to support a media and supplier environment that only works with regulated operators. iGO will have more to say about further efforts to combat the illegal market in future."
The iGO annual report covers the period prior to the launch of the iGaming market, so there are no revenue numbers included. There were also costs the agency had to incur to get itself off the ground, such as hiring employees.
Salaries and benefits were responsible for approximately $3.3 million in costs during the year, "Information Technology/Infrastructure Services" for almost $2.1 million, and "General Operating, Administration & Other" accounted for another $1.7 million in expenses, among other things. Some of these costs make up the $7.3 million owed to the AGCO, which provided iGO with funding and people to help the agency with its human resources, IT, payroll, and procurement operations.
This left iGO in the red for its first fiscal year, although its publicly reported revenue figures suggest that won’t be the case for 2022-23. The agency also told Covers in an email that it currently covers 100% of its operating costs.
“The regulated igaming market launched on April 4, 2022, and accordingly, there were no revenues generated in the 2021-22 fiscal year,” the agency’s report notes. “As a result, the Corporation ended the year with a net deficit from operations of $8.7 million.”
This story has been updated from its original version to include additional comments from iGO.
