On the Road to Single-Event Sports Betting and a Regulated iGaming Market in Ontario

Monday, June 7, 2021

A clearer picture of the future of internet gaming (“iGaming”) in Canada is forming as the federal, provincial and territorial governments appear to be committed to the vision of realizing this new market. Harnessing the power of the Canadian gambling, gaming and esports industries, the iGaming market is tracking to be a transformative yet carefully regulated market in Ontario.

Progress of Bill C-218

Bill C-218 (“C-218”), which proposes to legalize single-event sports betting in Canada, passed its second reading in the Senate on May 25, 2021. C-218 has made strong headway since it was first proposed by the federal government in November 2020, and the progression of C-218 through the legislative process is a promising and exciting step for many Canadians. C-218 will next be reviewed by the Senate’s Standing Committee on Banking, Trade and Commerce. If it passes that stage of review, it will move to a third reading in the Senate and, if passed, will finally move to receiving Royal Assent from the Governor General before becoming law.

Discussions in the Senate have led to a proposed amendment to C-218 relating to an explicit prohibition on match fixing. To the extent an amendment is required, C-218 may be sent back to the House of Commons for review, delaying the bill’s passage until after the summer adjournment, when the House of Commons and the Senate resume work.

Our previous updates, Raising the Stakes: Proposed Changes to Canada’s Gambling Industry and Canada Doubles Down on Single-Event Sports Betting, provide a summary of the earlier stages of the legislative developments relating to single-event sports betting.

Discussion and Planning for Ontario’s iGaming Framework

As the regulation of single-event sports betting will ultimately fall to the provinces and territories if C-218 receives Royal Assent, the Ontario Government has kept pace with the momentum of C-218 by taking steps to create the regulatory infrastructure that will be needed to operate an iGaming market. The Alcohol and Gaming Commission of Ontario (the “AGCO”) has been working on the vision that would be realized if C-218 receives Royal Assent. In March 2021, the AGCO published a discussion paper entitled, A Model for Internet Gaming in Ontario (the “Discussion Paper”), and launched an online engagement portal (the “Engagement Portal”) for interested stakeholders to play an active role in providing input on proposed policies while keeping informed of relevant developments. In the Discussion Paper, Ontario outlined a preliminary framework for creating a safe and regulated iGaming space.

Commercial Agreements with Private Operators

While the AGCO will retain its regulatory role over iGaming, a subsidiary of the AGCO will be created for the purpose of managing and regulating iGaming sites. The AGCO states that this delegation is designed to avoid conflicts of interest; while one regulatory body oversees the rules, the other enforces them. This separation would also facilitate a revenue-sharing model, where the subsidiary of the AGCO would enter into commercial agreements with private operators as opposed to collecting gaming taxes. While the particulars of this model are still in consideration, the goals of the Ontario Government are to ensure operational control and tracking of proceeds. The Discussion Paper also solicited comments from members of the public on different rate structures for revenue sharing (e.g., a single, universal rate versus varying rates) and on the potential impacts of such rates on the iGaming market (such as on profitability, barriers to entry for game operators, and gaming diversity).

Entering into commercial agreements with operators would also provide a forum to introduce additional safety and oversight requirements regarding player registration, data use, data retention and data sharing consumer protection, responsible gaming, and meeting accessibility standards.

Expanding Game Categories

The Ontario Government is considering various types of games to be included in its iGaming regulatory model. In addition to traditional offerings such as sports wagering (parlay betting on a minimum of two events and single-event sports betting), Ontario is considering broadly expanding the scope of the iGaming model to include novelty events wagering (such as betting on the Oscars or the gender of a royal baby) and peer-to-peer games such as poker. The decision to include these types of events will depend on public feedback, perceived impacts on fairness, and Ontario’s ability to implement an all-encompassing framework.

The comment period for the Discussion Paper closed on April 16, 2021. It is anticipated that Ontario will provide an update on the feedback to be implemented by fall 2021.

AGCO Engagement Portal: A Forum for Providing Input

Additional discussion papers have been and are anticipated to be released for input on the Engagement Portal. The AGCO first made available a draft of the Registrar’s Standards for Internet Gaming in March 2021, comprised of detailed requirements for responsible gaming, player account management, the maintenance of game integrity and public safety. The comment period for these proposed standards closed on April 30, 2021.

The next opportunity for stakeholders to provide their input relates to the proposed eligibility requirements and application procedure for those wanting to participate in the regulated iGaming market. The comment period closes on June 14, 2021. The AGCO’s discussion paper on a proposed eligibility program (the “Eligibility Program”), which was published on May 19, 2021, can be found on the Engagement Portal. The discussion paper on the Eligibility Program describes the proposed types of registrations and costs of participating, application timing for registration of operators and game-related suppliers, elements of the application, and the processes for certifying technology (to be used as part of gaming).

The most notable part of the proposed Eligibility Program is the AGCO’s introduction of the role of “independent testing laboratories” (“ITLs”), which are intended to play a key role in the vetting process by carrying the burden of pre-testing games for the AGCO. ITLs must be registered with the AGCO and will be responsible for certifying games that operators wish to offer through the iGaming market. The registration process for ITLs is now open.

Next Steps

The circumstances are ripe for tapping into the Canadian iGaming market, which some industry participants have estimated as representing an up to $6.5 billion opportunity. Assuming that C-218 receives Royal Assent, Ontario plans to launch approved games by the end of 2021. Market participants can look forward to many interesting developments in the iGaming industry in the months ahead.

If you have any questions with respect to the matters discussed above, please contact Michael Rennie at [email protected], Himani Trivedi at [email protected] or any other member of our Entertainment, Media, (e)Sports and Gaming practice group.

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.

If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.