The status quo in Canada for online gambling is regulated lottery monopolies alongside a flourishing unregulated gray market

Understanding Ontario’s Online Gambling Plan, Part I: The Canadian Status Quo

There’s considerable excitement around Ontario’s plan to privatize online gambling, but also a lot of confusion. The launch of the first sites operating under the new system will take place on April 4.

However, many Canadians aren’t clear on the status of online gambling under Canadian law to begin with. Some may not know what options they have available, or that they had such an option to begin with. Others may already be gambling online without understanding the legality of what they’re doing.

Articles in this series

Let’s start at the beginning

In this series, we’ll be looking at how things will change under privatized iGaming in Ontario. We’ll also be helping you to understand how that market will differ from Canadian online gambling in other provinces, and from regulated markets elsewhere, such as in the US.

Before we get to that though, it’s important to understand the current status, pre-April 4. The key points are:

  • Canadian federal law allows provincial agencies to conduct and manage most forms of gambling.
  • Online gambling is largely a gray area, as the relevant laws predate the modern internet.
  • Almost all Canadian provinces have some form of lottery-operated online gambling available to them. However, most don’t have the full range of possible products (casino, sports betting and poker).
  • In the retail gambling sector, there is a precedent for public-private partnerships, whereby the lottery owns the physical casino building but contracts a private company to operate it.
  • First Nations also conduct some gambling activities in Canada. However, Canadian law doesn’t go as far as the US Indian Gaming Act in terms of establishing the parameters of these rights.

Let’s take a look at these points in more detail.

What the Canadian Criminal Code says about gambling

The portion of Canadian federal law concerned with gambling is actually quite simple. That’s because it leaves most of the details to the provinces.

The Canada Criminal Code uses the unusual term “lottery scheme” to refer to gambling. However, it defines this broadly, to include most things we think of as gambling, including casino games.

The most important language in the Code, for our purposes, reads:

“Notwithstanding [general prohibitions against gambling] it is lawful […] for the government of a province, either alone or in conjunction with the government of another province, to conduct and manage a lottery scheme in that province, or in that and the other province, in accordance with any law enacted by the legislature of that province.”

The section in question goes on to grant rights to limited forms of gambling in a few other cases, such as for charities and fairs.

In terms of types of activities, there are a few that it prohibits outright, such as three-card monte, a game often associated with cheating. Until last year, single-game sports betting was on the list. That changed in June, however, when Bill C-218 received royal assent from the Governor-General, opening the door to sports betting in Canada.

In other words, most gambling is legal in Canada, but it falls to the provinces not just to enact suitable laws, but to “conduct and manage” the business through provincial agencies or crown corporations. Unfortunately, there is some ambiguity about what exactly “conduct and manage” means, and consequently some disagreement between experts.

As we’ll discuss in later parts of this series, this is one hazard Ontario faces. One way its plan could fail is if the courts find that its relationship with private sector operators isn’t hands-on enough to qualify as “conducting and managing” them.

Canada’s gambling laws don’t account for the internet

In the late 1990s and early 2000s, most of the world was a gray market for offshore online gambling. What we mean by that is that gambling over the internet with companies based in other countries was arguably legal by virtue of the fact that most countries gambling laws hadn’t anticipated the possibility and didn’t address it one way or another.

Many countries have rectified that situation, either by explicitly legalizing online gambling, or taking measures against it. Canada has done neither. Thus, more than two decades into the reality of online gambling, it remains a gray market.

This is in contrast to the US, which became a black market with the passing of the Unlawful Internet Gaming Enforcement Act (UIGEA) of 2006.

Part of the reason that Canada hasn’t acted is that enforcement is difficult. By definition, offshore companies themselves are out of the reach of Canadian law, so more creative approaches are needed. The UIGEA, for instance, makes it illegal for banks and payment processors to facilitate transactions related to offshore gambling.

Canada’s own laws make the situation more difficult. For instance, Quebec’s attempt to force internet service providers to block access to offshore gambling sites failed a constitutional challenge.

The result is that many offshore operators, even ones who avoid black markets, serve Canadians. They even advertise on Canadian television, promoting their play money dot-net sites so as to be able to claim they’re not advertising a gambling product.

Lottery operated online gambling sites

Though Canadian law doesn’t mention internet gambling, it does address electronic games. It excludes them from charitable gambling, but leaves them available to provincial lotteries.

When it comes to servers based within Canada, then, online gambling has the same legal status as retail slot machines and video lottery terminals.

Nine of the ten provinces have either set up their own online gambling sites through their lotteries or a subsidiary, or else have partnered with another province to give their residents access to such a site. There are five such sites in total:

  • Ontario Lottery and Gaming (OLG) offers online products directly through its lottery site, only for Ontario residents.
  • Atlantic Lottery Corporation (ALC) covers NB, NL, NS and PEI. Like OLG, it offers online products directly through its lottery site.
  • Espace Jeux is a subsidiary of Loto-Québec. It offers online products separately from the lottery, only to Quebec residents.
  • PlayNow is a subsidiary of the British Columbia Lottery Corporation. It serves both BC residents and those in Manitoba, through an agreement between the two provinces.
  • PlayAlberta is owned by Alberta Gaming, Lottery and Cannabis. It operates separately from the Western Canada Lottery Corporation, serving only Alberta residents.

In most cases, these sites offer both online casino games and sports betting, but not online poker. The exceptions are as follows:

  • PlayNow and Espace Jeux both offer online poker, and share traffic for this. The products in question are called PlayNow Poker and OK Poker, respectively.
  • ALC offers sports betting and instant online lottery games in all four provinces. However, only New Brunswick has authorized online casino games. So NL, NS and PEI residents are currently without such an option.
Which lottery-operated online gambling products are available in each province

Lottery-operated online gambling sites in Canada (Map: Online Poker Report)

Private sector partnerships

This is not to say that the provinces are the only ones profiting from legal gambling in Canada, online or otherwise. Most gambling, anywhere in the world and whether publicly or privately operated, relies heavily on third-party suppliers.

The average gambler may not realize this, because most suppliers work on a white-label basis. These companies include the likes of IGT, Light & Wonder, GAN, Aristocrat Leisure, Evolution and many more. Their products can include everything from physical scratch-off lottery tickets and draw ticket terminals, to slot machine hardware and software, to back-end casino management systems.

Day-to-day operations at many Canadian retail casinos are also being delegated to the private sector. Great Canadian Gaming is a major player in this space, with 25 casinos in British Columbia, Ontario and Atlantic Canada. Other companies have gotten in on the action as well, such as the American casino chain Caesars, which operates a property in Windsor on behalf of OLG.

All of this complies with federal law, because the provincial lotteries are still clearly “conducting and managing” the business. They handle expenses and revenue, make strategic business decisions, take care of the marketing, and so forth.

First Nations gambling

First Nations casinos also exist, along the same lines as tribal casinos in the US. However, federal law doesn’t guarantee First Nations rights in this regard. Rather, it comes down to compacts between First Nations and the provinces. Of the nearly two dozen First Nations casinos in Canada, most are in the Prairie provinces.

First Nations groups have often claimed they have treaty rights to conduct gambling, which haven’t been honored. This, too, is likely to result in legal challenges to Ontario’s plans.

Saskatchewan is unique among provinces in that its approach to providing legal online gambling will be through the First Nations. It has struck a deal with the Federation of Sovereign Indigenous Nations (FSIN) to create a site offering online casino and sports betting. This will be operated and managed by the Saskatchewan Indian Gaming Authority (SIGA), which is in charge of the majority of the province’s retail casinos.

This has not yet launched, however. So, for the time being, there is only one model for legally recognized online gambling in Canada, which is the lottery monopoly. Soon, however, there will be three:

  • The lottery monopoly model
  • Saskatchewan’s First Nations partnership model
  • Ontario’s semi-privatized model

The remaining articles in this series will focus largely on the upcoming Ontario market, which has both a lot of potential upside, and a lot of potential problems.

Continue reading

Next Article: Part II – The Goal And The Approach

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- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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