The regulated market for online sports betting sites in Canada’s most populous province will celebrate its first anniversary on Tuesday, marking a year of eye-catching and trailblazing growth.
Ontario sports betting entered a new era on April 4, 2022, when an updated regulatory framework for internet gambling went live in the province. That competitive market allowed multiple private-sector operators of online sportsbooks and casinos to legally take bets. It also came after years of unchecked activity by “grey” operators regulated and licensed abroad or outside the province.
The new government agency legally responsible for the market, iGaming Ontario, announced on April 4 last year that at least 17 sites were live within the new framework on its first day. A year later, more than 70 sites are offering sports betting, poker, and casino games in Ontario.
“Ontario has quickly become one of the most robust and competitive online gaming markets in North America,” said Benjie Levy, head of PENN Interactive and president and chief operating officer of theScore, in a press release on Monday. “We commend the Alcohol and Gaming Commission of Ontario (AGCO) and iGaming Ontario (iGO) for the successful establishment of a regulated online gaming framework that provides important consumer protections, features comprehensive responsible gaming measures and contributes to economic development throughout the province.”
A few question marks
Ontario’s experiment is in addition to the legal sports betting and iGaming offered by the government-owned Ontario Lottery and Gaming Corp. It also remains the only market of its kind in Canada, where most other provinces have been content to allow their lottery and gaming corporations to have a legal monopoly on online gambling.
More than $20 billion has been wagered on regulated iGaming sites in Ontario since April 2022, and more than $875 million in revenue has been generated. Approximately 20% of those receipts should go to the province via the revenue split iGO has with operators.
But even just a year in, questions are looming over Ontario’s iGaming market. A few operators have exited the province, with one citing the fierce competition for customers. What's more, at least one legal challenge has already been filed that threatens to undo the government’s work if it is successful, and it could take many more months to resolve the matter.
The burst of advertising and promotion by operators has also stoked general annoyance at times and concern about problem gambling. Moreover, some sports bettors have complained about the treatment they get from operators, while the daily fantasy sports industry has been wiped out.
All of the above could prompt action by regulators or lawmakers, although the Progressive Conservative government that enacted the iGaming market received another majority mandate from voters in last year’s provincial election and won’t be going anywhere anytime soon.
The competition among operators will have to be settled by the sportsbooks themselves. An uncapped market in Ontario means there will be both winners and losers among companies, and a few firms have already tapped out. The most notable thus far has been Coolbet, whose owner, GAN Ltd., decided to exit Ontario's regulated market after getting sandwiched by preexisting operators and deep-pocketed newcomers.
“For those markets where we don’t see a clear and rapid path to profitability outside of Latin America, we will pull back resources and/or exit those markets,” GAN CEO Dermot Smurfit said during a conference call for analysts and investors last week. “To that end, we have exited the Ontario market described by some industry experts as the most competitive market in the world.”
Coolbet's sportsbook is now closed in Ontario: pic.twitter.com/NNK3AHjAin
— Geoff Zochodne (@GeoffZochodne) March 23, 2023
Whether more operators follow suit remains to be seen. In the meantime, Ontario bettors have a lot of choices, including retail sportsbooks that have sprouted at brick-and-mortar casinos.
Some questions have been asked about the legality of Ontario’s iGaming market. The fact that no other province has followed Ontario’s lead could speak to its boldness, but it also suggests other provincial governments are waiting to see if it will survive and prosper.
A legal challenge to Ontario’s iGaming framework was launched last year by the Mohawk Council of Kahnawà:ke (MCK). The MCK established the Kahnawà:ke Gaming Commission (KGC) in 1996, and the commission has been licensing and regulating online and land-based gaming within and from Kahnawà:ke (which is located south of Montreal, in Quebec) ever since. Now, the MCK is questioning whether Ontario’s iGaming market is constitutional or legal and seeking its shutdown, saying it is costing their community gaming-related revenue.
A hearing in the matter won’t happen until February 2024, according to the MCK, leaving a lot of time for a resolution outside the courts. The Ontario government has also defended the legality of the iGaming framework in the past, including by telling Covers that it had “carefully designed the online gaming model so as to achieve that objective in compliance with the requirements of the Criminal Code that apply to Ontario."
Fantasy, fines, and 'risk-free'
Canadians were caught somewhat unaware by the explosion of advertising that happened last April when the iGaming market launched, as operators sought to attract attention from new bettors. The sheer volume of ads, as well as a barrage of betting content from traditional sports broadcasters, got on some people’s nerves. Concerns were also raised about athletes and celebrities appearing in sports-betting commercials.
Yet Ontario may have more stringent advertising regulations than some U.S. states with legal sports betting. Indeed, the province doesn’t allow operators to broadly advertise sign-up bonuses or other gambling inducements; rather, customers will only find them on a site or by opting in to receive communications from operators. Several operators have been fined by the AGCO for advertising missteps.
Bookmakers are starting to take matters into their own hands as well, picking up on cues from lawmakers and regulators in the U.S., such as by dropping the use of “risk-free” promotions and emphasizing their responsible gambling efforts. Furthermore, it’s possible the AGCO could make additional tweaks to the rules, such as it did with a self-exclusion loophole for betting.
There is also hope in the daily fantasy community that the AGCO will make tweaks that could bring the industry back to the province. Due to the current rules that lump "pay-to-play" fantasy sports in with other gambling products, and because those rules require all players to be in the province, DraftKings, FanDuel, and others shuttered their DFS operations in Ontario.
However, Ontario’s model has thus far proven successful at getting “grey” operators to move into a regulated market. And, with just a year of wagering completed, regulators may decide to stand pat for a while longer.
“As Canada’s first province to establish a legal market for private operators, Ontario has distinguished itself, while proving the widespread benefits that derive from a consumer friendly and commercially minded framework,” Levy added in their press release. “We believe Ontario’s successful model provides a road map for other provinces to modernize their online gaming frameworks and stamp out the illegal grey market.”
