Ontario online gambling operators are frustrated with iGaming Ontario (iGO) over unexpected fees. The provincial agency says it has received due diligence fees from its financial institution and will pass them on to the operators.
According to Gaming News Canada, which broke the story, iGO informed operators on Feb. 21 to expect invoices for the chargebacks.
The notice explains that these bank fees cover:
Due diligence processes [the bank] conducts before Operators can begin to make deposits to iGO bank accounts. A large number of Operators entering an iGaming market that is newly regulated has meant that iGO’s bank has conducted a high volume of due diligence activities.
Operators Told to Expect Up to $150,000 in Chargebacks
As reported by GNC, iGO specified in the notice the charges would apply to those operating in the market before Dec 31, 2022. It also said the extra cost would be from $25,000 to $150,000 (CAD), depending on individual expected annualized GGR, as determined by iGO.
To justify its decision to pass on the cost to operators, iGO pointed to Section 5.5.2 of the Finance Policy, titled Chargeback of Fees. iGO promised that the fees would be a “one-time” charge.
Bonus believes the Finance Policy in question to be part of the undisclosed commercial agreements signed between operators and iGO. There does not appear to be such a policy on the agency’s website, and it has not responded to a request for clarification.
Some operators are looking to push back against the unexpected fees with the help of the Canadian Gaming Association (CGA). The CGA is a trade organization representing many of the companies operating in the Ontario online casino and sports betting market, as well as the Canadian retail gaming sector.
“We’ve written iGO on their behalf to express their displeasure,” Canadian Gaming Association president and CEO Paul Burns told GNC.
Burns also indicated that some CGA members had contacted iGO on their own:
The industry needs to understand that there’s cost certainty and regulatory certainty.
This is a highly competitive market. Having surprises and unplanned costs, no matter how big or small, disrupts business plans. None of the operators heard from the banks, and didn’t know due diligence was being done.
Banks Hesitant to Accept the Gambling Industry
In an email to GNC, Amanda Brewer, Canadian country manager for Kindred, expressed her frustration with Canadian banks:
Despite repeated attempts by the industry – the Canadian Gaming Assocation [sic], iGaming Ontario, and individual operators – to invite the banks to the table so they could educate themselves on the standards and the stringent AML/KYC regulations that all operators must uphold, they refused, And [sic] this is the result.
An industry created by the province to generate jobs, economic development and revenue was ignored. What signal does this send to future industries that want to do business in Ontario?
Indeed, banks often create a bottleneck for companies in heavily regulated industries like gambling.
Daily Fantasy Sports faced similar hurdles during its early years in the US due to legal ambiguity.
Even New Jersey’s legal gambling market was initially off-putting to banks. By the time the state legalized online casinos, US financial institutions had grown used to the Unlawful Internet Gambling Enforcement Act (UIGEA). This federal law sought to crack down on offshore gambling by penalizing anyone facilitating financial transactions with unregulated operators.
As a result, it took almost a year from the launch of NJ gambling before PayPal first allowed transactions with regulated sites.
Ontario Operator Application Guide Opened Door to Extra Fees
iGO has acknowledged the costly learning curve, albeit in a roundabout fashion:
For clarity, these charges are different from regulatory cost recoveries invoiced by the Alcohol and Gaming Commission of Ontario (“AGCO”). Furthermore, iGO does not foresee banking due diligence costs to be an ongoing chargeback after the first few Operating Years once the market matures.
Ontario’s regulator, the Alcohol and Gaming Commission of Ontario (AGCO), had already warned operators of additional regulatory fees.
According to the AGCO’s Internet Gaming Operator Application Guide:
Any applicant may be required to pay the reasonable costs of an investigation prior to processing of their application. These costs would be levied on an as-required basis, depending on whether additional investigative activities are needed and the intensity and cost of those activities.
The AGCO aims to offset the overall cost of regulating internet gaming. Each operator should anticipate possible additional payments to recover these costs. The specific amount per operator is yet to be determined. However, the amount could be significantly greater than the above-mentioned regulatory fee of $100,000 per gaming site along with investigative charges.
So, operators can complain about being asked to pay. But whether they can do anything more about it is another question.
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