Ontario rolled the dice for online gaming companies. People are betting a lot

It has been about 18 months since the Ontario government announced it was opening up the online gaming market in the province, a move which has led to a massive uptick in legal gambling among its 15.6 million residents.

It has also led to a massive uptick in gambling ads for Canadians as well, as dozens of companies from Canada and abroad vie for customers in the nation’s largest province.

While the online gambling might seem like a more recent phenomenon due to the massive uptick in advertisements, Canadians have been wagering on the internet for at least two decades, according to Paul Burns, the president of the Canadian Gaming Association.

“People were doing it and it was easily accessible,” Burns said. “Everyone in Canada’s had access to it for more than 20 years.”

Prior to the government regulating the online market, Ontarians, much like the rest of the country, were wagering on so-called “grey-market” sites, which offered little protection to consumers.

Single-game wagering had been illegal since the 1960s but provincial lotteries were offering legal parlay (multi-game) bets as the only legal form of sports betting. While a parlay bet has a high payout, it also offers a much lower chance of winning.

The provinces would see around a 30 per cent return on bets vs. the five to 10 per cent that traditional gaming houses see from sports wagering, according to Burns.

Single-game wagering was one of several reasons Canadians turned to the grey market to make their wagers as provincial lotteries were not legally allowed to offer the option until 2021.

The federal government makes the betting laws in Canada while the provinces decide how to implement them, and there had been a push for a while to legalize single-game wagering in an effort to eliminate the grey market.

After two stalled moves by the federal government to legalize single-game sports wagering in the past 15 years, legislation finally came into effect in June 2021 that made betting on one game or event legal in Canada.

Going almost hand-in-hand with that, about 10 months later, the Ontario government then moved not only to offer single-game wagering through OLG, but also to open the market to private companies.

Burns said the move by the province was in part to eliminate the grey market, which had two main issues: a lack of consumer protection; and the fact that almost all of the money was heading out of the province.

“Money really wasn’t the first driver, actually. It was about consumer protection,” Burns explained. “It was being done with no oversight. Minors can have access to online sites, things like that.”

The province also now gets a cut from the gaming industry, money that previously often went to offshore gaming sites.

“So in essence, what the structure is, is you have a contract with iGaming Ontario,” Burns said. “You are to provide them with a full accounting of your operations and play reporting on a weekly basis.”

He said the province takes 20 per cent of the profit as its share through iGaming Ontario.

At the time Ontario opened up the gaming market, the province estimated that Ontarians were placing $1 billion in online bets per year, with 70 per cent of that total being wagered on grey market sites.

“Many players who access these sites are not even aware they are not regulated,” a release from the Attorney General’s Office noted at the time.

A year after the province made that move, AGCO announced that around 85 per cent of players had moved off the grey market and into legal wagering sites.

When Ontario opened the door to private companies, iGaming Ontario was created to manage the process. It is a subsidiary of AGCO, which remains the watchdog for gambling in Ontario.

iGaming Ontario releases quarterly updates on its website and the most recent report, which was released in October, said there were 943,000 active player accounts in Ontario with the average spend being $191 a month.

Over just three months, this worked out to about $14.2 billion in online wagers, with $11.9 billion of that total coming from casino games such as blackjack and slots. A total of $1.9 billion came from sports betting while a very small chunk came from poker.

The government takes 20 per cent of the net profits, giving it a gross total of $540 million from the quarter.

In addition to the province getting a cut of the profits from gaming companies, it also receives its share of the $134 million in HST collected by the Canadian Revenue Agency from July 2022 to March 2023 or roughly $82 million.

Naturally, one might think that opening the border to dozens of outside operators would spell the end for the Ontario Lottery and Gaming Corporation, but it has also seen an increase in revenue over the past year from its sports offerings, according to an OLG spokesperson.

“The open market levelled the playing field for us,” Tony Bitonti said in an email.

“OLG went from being the only regulated gaming operator in the province to one of many, who all had to adhere to the same rules.”

While he could not provide specific numbers, he added: “Knowing that, we had to focus on specific areas of growth that would leverage how we are different from our competitors — one factor being, the significant trust built with customers with the OLG brand for over 30 years. This has been a big factor in our sustained growth.”

So while the province continues to get a growing share of revenue from OLG and private operators, iGaming also commissioned a study by Deloitte which looked at some of the other benefits, such as job creation, that the move to open up the online gaming market had created.

The Deloitte report estimated that the opening of the gaming market in Ontario had created 12,000 full-time jobs while also adding close to $1.6 billion to Ontario’s gross domestic product between April 2022 and April 2023, the first year after the province opened things up.

Burns explained that there have been a number of startups in Ontario, such as North Star Bets and Rivalry, in addition to the number of companies that were also quietly operating before the province officially opened up the market to private companies.

There have also been a number of companies from around the world such as Ligtip, which offers a site called tonybet.ca, and Bunchberry Limited, which offers Comeon.com, that have entered the Ontario market in hopes of getting a foothold into an expanding North American market.

All that said, there is no requirement for gaming companies to have a physical presence in Ontario, according to Burns, although the province will still take a cut of the gaming revenue they earn here.

While it has appeared to have been mostly smooth sailing for the online gaming market so far, there are a number of concerns as well.

Aside from the risks associated with gambling addiction, some in the country have raised flags about the risks of match-fixing.

Those concerns proved to be an issue back in December 2022 when AGCO placed a ban on wagering on UFC events.

The ban came after the commission said it had learned of recent alleged incidents involving possible betting by UFC insiders, as well as reports of suspicious betting patterns in other jurisdictions.

“This is not a decision we take lightly, knowing the popularity of UFC events in Ontario’s sports books,” former AGCO CEO Tom Mungham said in a release at the time. “However, the risks of insider betting on event and wagering integrity should be highly concerning to all.”

Six weeks later, the UFC made some changes that prompted AGCO to allow bets to be offered in Ontario once again.

In addition, the agency has also fined operators for various infractions including inducements, which could include things such as offers of free play, as well as for offering wagering on junior hockey.

In another case, Apollo Entertainment was fined $100,000 for violations of internet gaming responsible gambling standards. Among several issues alleged by AGCO was the failure to conduct interventions as one player lost over $2 million in less than four months.

And earlier this month, after a case in which a player lost $500,000 in less than three months, Pointsbet Canada was issued a $150,000 fine by AGCO for a number of alleged violations. These included failing to intervene when a player was potentially experiencing gambling harm and failing to have a 24-hour cooling period when the player adjusted their limits. The company was also accused of communicating inducements.

The $150,000 fine issued to Pointsbet is the largest that AGCO has handed down thus far to gaming operators since the market was opened.

“In Ontario, iGaming operators have an obligation to proactively monitor their patrons’ play for signs of high-risk gambling, and to take appropriate actions to intervene and reduce the potential for gambling related harms,” AGCO CEO Karin Schnarr said when the fine was announced.

“The AGCO will continue to focus on player protection by holding all registered operators to these high standards.”

Many of the commercials from some endorsers will soon disappear from the airwaves, at least on Ontario stations as AGCO has also changed some guidelines in that regard.

A couple of months ago, the provincial regulator announced that as of the end of February 2024, athletes will no longer be allowed to appear in endorsement campaigns. AGCO said the move will “help safeguard children and youth.”

The legalization of online casinos came in the midst of the COVID-era, creating a shift in the world of those who were experiencing issues with problem gambling, according to Nigel Turner, who does quantitative research for CAMH.

“Prior to COVID, the majority of people who were calling the Problem Gambling Helpline were calling for problems related to slot machines and casino table games,” Turner explained, noting the two offerings made up 90 per cent of the calls.

Turner said once COVID restrictions arrived, with the casinos closed, the number of calls the helpline received initially dwindled.

“That gradually crept back up during the pandemic but the casinos were still closed,” he said. “Because the casinos are still closed, this means people are changing how they’re gambling.

“Online gambling was actually a very small portion — in every study that’s ever done — a very small portion of what people were gambling on in Canada prior to COVID.”

He said that when the feds legalized single-game wagering, the Ontario Problem Gambling Helpline began to get more specific on how it was keeping its data.

He said that over the following eight months, the calls from those who were having issues with online gambling began to slowly rise.

According to Turner, the number of calls the helpline was receiving from online gamblers skyrocketed in April 2022 when gambling became regulated in Ontario.

“It went from being a relatively small percentage of the total number of people calling the helpline to being the number one reason. So it’s now taken the place the slot machine used to hold.”

Turner said that prior to the pandemic, the Problem Gambling Helpline was receiving about 216 calls per month from people seeking help, but that number jumped to 381 over the first six months of 2023 before dipping slightly to 348 over the past few months.

The scientist also noted the callers who have been seeking help have tended to be younger people, as they generally tend to be savvier about internet use.

“It was more a higher portion of males who tend to be more likely to go online,” he said.

He said that the caseload for treatment utilization in Ontario for problem gambling also dropped during COVID and remains below pre-COVID levels.

“Maybe it’s harder to get into treatment or whether there’s something else going on, but it’s actually still down compared to what it was prior to COVID,” he said, noting that those numbers were as of December 2022 so they may have increased this year.

In general, Burns said that the gaming community is very pleased with the way that Ontario has chosen to regulate the industry.

“These are robust standards that are some of the highest not only in North America, but the world,” he said. “The industry is fine to be working them in because we can do those things and willingly do them.”

Burns also pointed out that the rules for most states south of the border tend to favour larger companies.

“DraftKings, FanDuel and BetMGM and in a distant fourth Caesers — about 90 per cent of the sports wagers in the United States go through those four sites,” he said.

He said that one of the rules that favoured the larger companies was an allowance for inducements, as the bigger companies have deeper pockets to offer incentives like free plays or cash-back offers.

“Ontario actually created a much leveller playing field for competition,” he said, “because you are competing on product and customer service, not on how much money you are giving your customer.”

So far, Ontario is the only province in Canada that has allowed anyone to offer legal gaming outside of provincial lottery corporations.

Atlantic Lottery recently issued a statement in which it estimated that residents of the four Atlantic provinces were betting $170 million per year on the grey market.

“This is a significant amount of money that could be staying right here in our region to fund important public services, but instead continues to be taken away from helping our communities to the sole benefit of these illegal operators,” Atlantic Lottery stated.

Several people in the gaming industry told Global News that they expect Alberta to be the next province to make changes.

One reason for that belief is that the mandate letter for Dale Nally, Minister for Service Alberta and Red Tape Reduction, included guidance to make some adjustments.

Nicky Gocuan, a spokesperson for the minister, told Global News that Nally has been in discussions with some in the industry on potential changes.

“The minister has met with various industry representatives in order to better understand the broad range of opportunities available to the province,” Gocuan said in an email.

“No timelines have yet been established for finalizing and implementing Alberta’s new online gaming strategy.”

He said the province’s Play Alberta site is the only regulated gambling website in Alberta.

“The platform provides a secure, age-controlled entertainment environment that promotes responsible gambling behaviour, educates consumers and helps players manage their play through responsible gambling tools and resources from AGLC’s GameSense program,” he said.

While it remains to be seen what will happen in other Canadian provinces, Turner had some advice for Ontarians who dabble in gambling.

“You’re going to lose. The players are going to lose,” he said. “You know, they don’t put all that advertising money into it so they can give away money for your benefit.”

Turner also noted: “There are more expensive ways of entertaining yourself. But as long as you think of it as entertainment, that’s good.”

The scientist offered ways for people to get some help if they are experiencing problem gambling.

“The first thing you need to do is call Connex Ontario, the Ontario Problem Gambling Helpline,” Turner said. The hotline is available at 800-263-2288 or on the web at ConnexOntario.ca.

“Call them and they will give you information on treatment services, self-help groups and other information to help guide a person towards escaping from their problem.”

Those who live in Toronto, Turner added, can call CAMH and be put in touch with the hospital’s gambling, gaming and technology overuse treatment service.