Ontario’s Online Gambling Market Faces Its First Legal Challenge

We always knew this was coming: Ontario’s online gambling privatization plan will face a legal challenge. The only question was where it would come from.

In April, Canada’s largest and most populous province attempted something no other Canadian jurisdiction had tried. Under Canadian federal law, all gambling must be conducted and managed by provincial governments. The Ontario government, under Doug Ford, created a model under which private sector operators could provide their products on behalf of a government agency, iGaming Ontario (iGO).

Before Ontario online gambling launched, various experts opined that it was legally dubious whether iGO’s involvement would be sufficient to count as “conducting and managing” online casinos in the eyes of the law. Those voices included the province’s own Auditor General.

On November 28, the Mohawk Council of Kahnawà:ke (MCK) announced that it had launched a constitutional challenge against the province. As expected, it will challenge Ontario’s interpretation of Section 207 (1), which contains the key “conduct and manage” language.

MCK’s press release asserts that:

iGaming Ontario is not ‘conducting or managing’ the gaming that takes place on private operators’ sites. Instead, iGaming is allowing operators to conduct and manage themselves, subject to the payment of a portion of their revenues toOntario.

Canadian First Nations were among the most likely parties to file such a challenge. Other possibilities included the retail casino industry, the casino workers’ union, or federal prosecutors.

Bonus reached out to the AGCO for comment on the current legal challenge, but received only a boilerplate response and a suggestion to contact the Office of the Attorney General instead. Their response was terse:

Ontario has been served with a Notice of Application and is reviewing it.

As this matter is before the Courts, it would be inappropriate to comment further.

Why is MCK Challenging Ontario Online Gambling?

First Nations enjoy similar sovereign status to their counterparts in the US. However, Canada does not have an equivalent of the US Indian Gaming Regulatory Act, which clearly lays out these groups’ rights regarding gambling.

MCK was an early adopter of online gambling. It established its regulatory body, the Kahnawà:ke Gaming Commission (KGC), in 1996. Just three years later, KGC adopted rules for online gambling and began issuing licenses. 

Meanwhile, the first Canadian lottery-operated online gambling site didn’t launch until 2004. The US was even further behind, with the first regulated online gambling sites launching only in 2013.

MCK and other First Nations groups would have welcomed expanded opportunities to market retail and online gambling to Canadians in partnership with provincial governments. However, they feel that those governments have cut them out of negotiations.

MCK, like many First Nations, sees Ontario’s plan as an end-run around their gaming rights as well as Canadian federal law. It also opposed Bill C-218, which legalized sports betting nationwide.

Meanwhile, Saskatchewan has chosen a different path. Its first iGaming site launched earlier this month through collaboration between First Nations, the Saskatchewan government, and the British Columbia Lottery Corporation as the technology provider.

How Does the Ontario Online Gambling Model Work?

Ontario online gambling is a bit convoluted compared to US regulatory structures. Because of the phrasing of federal law, provinces cannot simply issue licenses to private sector operators.

Instead, Ontario attempted to extend its retail casino model to the online space.

Brick-and-mortar casinos in the province are owned by a crown corporation, Ontario Lottery & Gaming (OLG). It contracts with private companies like the Great Canadian Gaming Corporation (GCGC) to operate gaming activities at those casinos. Meanwhile, OLG conducts the marketing, manages the property, and so forth. A separate provincial agency, the Alcohol and Gaming Commission of Ontario (AGCO), acts as the regulator.

For online gambling, the province created iGO as a subsidiary of the AGCO. OLG continues to offer iGaming on behalf of the government directly. However, with approval from the AGCO, private sector operators can now enter into “operating agreements” with iGO.

Obfuscation Surrounding iGaming Ontario’s Role

In principle, iGO “conducts and manages” the activities of those companies, which merely offer products on its behalf, the same way GCGC and others do for the retail casinos.

It seems like a sensible plan at first glance. However, OLG’s role in retail gaming as the property owner is quite apparent. It’s much less obvious what iGO does besides signing operating agreements and collecting money.

Past attempts by Bonus and other news outlets to obtain clarification on that front have tended to receive frustratingly vague responses.

However, that is what’s at issue in this case, so the coming legal battle will presumably answer the question of what iGO’s role is and whether it rises to the level of “conducting and managing,” as the federal court system understands those words.

About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for Bonus.com, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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