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The highest court in Quebec has ruled that blocking ISP addresses to deter unlicensed online gambling is unconstitutional.
Provincial leaders published plans to do just that in their annual budget act in 2016. The move was designed to shore up declining revenues for Loto-Quebec gambling site Espace Jeux, which runs one of two legal online poker rooms in Canada. The other is BCLC’s PlayNow, which serves both British Columbia and Manitoba, and shares its player pool with Espace Jeux.
The ruling has far-reaching implications, both for provinces in Canada considering regulation and for online operators, some of which have already exited the market.
You can see the full Superior Court ruling here.
Regulators have argued that gambling via unlicensed sites poses a consumer health risk. That risk, they contend, can be averted if players are diverted to the official Espacejeux platform.
The court was dismissive of this argument:
The Tribunal, after analyzing the pith and substance of the Provincial Provision, concludes that the association of this provision with consumer protection is only superficial. The essence of the impugned provisions is to enforce the exclusive right of the province to exploit online gambling by imposing an obligation on ISPs to block signals or data from content providers that the province considers illegal. These powers fall under federal jurisdiction.
As to the difference between Loto-Quebec’s problem gambling protections and those on unlicensed sites, the court was especially scathing:
…Loto – Québec’s responsible gambling control measures do not stand out, as to their nature and number, from those available on several sites considered to be illegal. The report also notes that Loto – Québec has reduced the scope of some of the responsible gambling measures (the introduction of personal time limits and expenditures) that it claimed to have put in place. These facts undermine the QMP’s argument that Loto – Québec sites are safer, especially for vulnerable players.
The country’s Wireless Telecommunications Association is responsible for bringing the legal challenge against the Attorney General.
The Quebec government commissioned the Nadeau Report in 2014 to examine its options for safe, regulated online gambling. Boosting Loto-Quebec’s revenue and driving more income to the province was the underlying goal.
The report proposed two options:
The report also recommended a number of ancillary measures:
The court noted that regulators had bypassed these recommendations, opting to move directly to ISP blocking. It also opined that Canadian law is ambiguous when it comes to gambling sites serving Canadian customers, if their servers are located outside the country.
The Stars Group recently moved its headquarters from Montreal to Toronto. Prior to the move, it had an excellent relationship with the local Quebec government. TSG was rumored to be the most-likely partner for Loto-Quebec if the “portal” option were to be implemented.
This ruling mitigates the legal concerns for the latter group. While the court didn’t fully remove the uncertainty, it did imply that the risk of prosecution of an overseas operator is minimal. It now appears that any company which pulled out of Quebec amid uncertainty can safely return.
The precedent should carry over into all ten Canadian provinces.
The New Jersey Division of Gaming Enforcement (DGE), on the other hand, has taken a hardline stance against operators/affiliates promoting or offering gambling in jurisdictions where they are not licensed.
The ruling puts Quebec in a difficult situation.
Local online poker regulation is, in practice, a deal between government and operators. The government promises to restrict the market to an oligopoly of providers, and the operators promise to implement consumer protections and pay taxes.
When a jurisdiction is not able to provide legal protection from competition, the market becomes considerably less attractive to licensed operators.
Swedish site Svenska Spel had to deal with this problem from day one. Its annual reports contained regular complaints about the business it was losing to overseas operators. Amid pressure from the EU, Sweden changed its gambling laws to allow licensed offshore sites.
There’s no EU to pressure the Canadian government to change its laws on online gambling. After this court ruling, however, Quebec politicians may start lobbying for change at the federal level.