Ontario’s Transitional Period Ends Soon, Are Crackdowns On Unregulated Sites Coming?

Unregulated online gambling operators need to be on alert in Ontario. Soon, the provincial online gambling regulator may start to crack down on illegal sites.

Canada Day may be the deadline Ontario iGaming operators have to comply with the law. However, regulators didn’t commit to that date.

Bonus asked the province’s iGaming regulator, Alcohol and Gaming Commission of Ontario (AGCO): “Beginning on July 1, what will AGCO do to ‘black operators’ who continue to offer iGaming in Ontario without seeking AGCO approval?”

Raymond Kahnert, a member of the AGCO communications team, responded yesterday:

A key objective of Ontario’s new igaming market is to bring sites that are already offering gambling to Ontarians under regulation so that they can be held to high standards of responsible gambling, player protection, and game integrity.

The AGCO has provided clear guidance around requirements for exiting the unregulated market for the purposes of eligibility for registration under Ontario’s Gaming Control Act.

This guidance can be found in the  Internet Gaming Operator Application Guide.

As part of this transition, the AGCO is committed to taking strong action to address any remaining unregulated Ontario market activity.

On its site, AGCO says it can bring operators and suppliers into compliance through “progressive sanctions,” such as warnings, suspensions, fines, and revocations.

“The transition period won’t go on forever,” Amanda Brewer told Bonus. Brewer is the Canadian manager for Malta-based Kindred Group, whose flagship brand Unibet is among Ontario’s regulated online gambling operators.

Why Ontario Allowed A Transitional Period

In addition to paying the $100,000 per year fee, operators must go through the rigorous vetting process detailed in the AGCO application guide. AGCO acknowledges on its site that its application process can take up to two months.

AGCO decided that it wanted to avoid any blackout periods. To that end, it has allowed former gray market operators to keep their sites running while it reviews their applications.

That alone creates a bit of an imbalance for operators in the newly expanded iGaming marketplace. On April 4, Ontario expanded the market and allowed private online gambling operators to launch. To launch, legal iGaming operators need to get AGCO approval first. Then, they can sign an operating agreement with iGaming Ontario (iGO).

So, the current situation has legal operators competing against others that are still in the gray market.

Legal operators must adhere to AGCO regulations regarding taxation, marketing language, and more. Transitioning operators needn’t do so for now.

However, unregulated operators who aren’t seeking provincial approval may be the ones most irksome to legal operators. Soon, those operators will be officially in the black market and may experience consequences.

Kindred On Regulated Markets And Ontario’s Transition Period

Brewer told Bonus on May 25:

The challenge is if a significant number of illegal operators remain and continue to undermine the legal operators by offering an easier way to access their products, as well as some inducements legal operators cannot, which does not fully protect the customer.

Some of this is to be expected with the launch of a new market, new regulations, and a new regulator. The transition period is unique and we do expect to see more operators join the fully legal side – and as we get closer to July 1, more and more licensed operators will be waiting to see what the AGCO does for those operators who have not come into compliance.

Kindred SVP US Manuel Stan told Bonus that Europe’s market approaches to iGaming are different:

Channelization is key for the success of any locally regulated market. The licensed operators must be given the right framework to operate in a competitive way. A public ban on bonuses and inducements only makes sense when the entire market is adhering, but not great when the black market continues to offer them. This is an example of market teething issues when it comes to how we communicate bonuses, payment options, KYC/regulations, etc.

Ontario’s Marketing Rules For Legal Operators

Once iGaming operators receive full approval from AGCO and iGO, they must comply with AGCO’s marketing and advertising guide. 

These guidelines are strict.

AGCO says:

Advertising and marketing materials that communicate gambling inducements, bonuses, and credits are prohibited, except on an operator’s gaming site and through direct advertising and marketing, after receiving active player consent.

That active player consent also has to be for the current product. So that means that operators can’t market to pre-existing customers of a formerly gray market product, such as daily fantasy sports (DFS).

Kahnert said on March 31, before the expanded market launch:

To clarify, for the marketing and advertising of bonuses, credits, or inducements, the operator must obtain active player consent for the site offering the bonus, credit or inducement.

This means consent cannot be implied based on consent provided on a different or third-party site, or prior to the opening of the market.

iGaming Marketing During Transition: Affiliates

Brewer says perhaps the most interesting part about marketing during Ontario’s transition period is what’s happening on affiliate sites. (This includes Bonus, as an affiliate working exclusively with regulated operators.)

Brewer points out:

Operators are responsible for the actions of their third-party suppliers, and the AGCO has taken great pains to specifically mention affiliates in its standards. Affiliates are not independently licensed, so operators are accountable for their actions.

There remains an issue with affiliates working on behalf of unlicensed operators. The AGCO is aware and has been clear that without an AGCO registration, affiliate services are out of bounds.

The inability to offer bonuses or inducements means that affiliates have fewer tools and must rely on more generic language. They are still important for building brand awareness and for directing customers to websites; and in some respects, the playing field is more level, as they can’t use bonuses to entice anyone. Any content that helps to promote brand, as well as interesting product and app features, remains very helpful.

It’s perhaps out of concern for that liability that some legal iGaming operators are avoiding using affiliates in their marketing strategies for the province. Others continue to consider affiliates a necessary part of a robust content marketing strategy.

FanDuel’s Transitional Marketing Focused On Responsible Gaming

New York City-based FanDuel accomplished its responsible gambling (RG) goals while creating brand awareness in Ontario that didn’t use prohibited marketing language.

On Launch Day, FanDuel announced that its first five days of television and digital marketing and advertising would concentrate on RG.

The announcement reads:

In keeping with FanDuel Group’s reputation in North America for responsible gaming, safer play will be at the forefront of FanDuel’s entry into Canada.

Once Ontarians visit FanDuel’s site, they can see the operator’s offers. That counts as inbound marketing and meets AGCO’s standards.

Also, when bettors gamble in the app or on the site, they’ve opted in for direct marketing. Sending them offers then is also in compliance with the guidelines.

Brewer says:

All operators have been asked to set aside a portion of their marketing/advertising for RG. So we can expect to see something from everyone.

The difference is that FanDuel used an RG campaign immediately to introduce itself to the province.

Last night, FanDuel Canada‘s Twitter feed housed a pinned tweet at the top. That tweet, dated April 10, included a video ad viewed 2,123 times. Hovering a cursor over the video shows a call to action to “visit FanDuel.com.”

The tweet also includes this wording:

Need help managing your play?

@FDSportsbook ‘s Responsible Gaming tools can become a key part of your betting system!

Available now in Ontario🇨🇦

Learn more at http://fanduel.com/playwell

Ontario’s Future Will Be Black & White

Legal or illegal? The situation for Ontarian gamblers will be more straightforward once the transition is complete and there’s no more gray market in the province.

Brewer thinks Ontario officials made the right choice not to outlaw gray market iGaming sites immediately.

However, that grace period is ending. Brewer concludes:

The short answer is you only have two options in Ontario: Apply and be granted a license, or exit out of the market. The ‘transition’ period won’t last much longer. But it is an open application process, so operators (non-grey market ones) can apply at any point in time.

Those legal private iGaming operators have to have enough faith in their product to pay that $100,000 annual fee. So far, AGCO’s approved 36 private online gambling site applications. iGO shows 24 of them have cleared the operator agreement hurdle.

The Ontario Lottery and Gaming Corporation (OLG) is also listed as approved by AGCO. That makes the lottery the 37th site on the list. However, OLG is the provincial iGaming operator and was already taking bets before April 4. As such, OLG doesn’t need iGO’s operator agreement.

In the meantime, the investment of time and money should make many operators committed to securing their place in the regulated market.

Black market operators will hopefully be relegated to the sidelines. AGCO may have a hard time stamping them out entirely, however. Canadian authorities don’t have the same reach as the US Department of Justice, so the seizure of illegal sites isn’t an option. Meanwhile, the neighboring province of Quebec already made one attempt to force internet service providers to block offshore gambling sites, only to lose a constitutional challenge.

About the Author

Heather Fletcher

Heather Fletcher

Heather Fletcher is Lead Writer at Bonus, concentrating on online casino coverage. She specializes in breaking news, legislative coverage, and gambling marketing strategy overviews. To reach Heather with a news tip, email [email protected].
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