Case Study: Why Regulation Will Be Good For The Canadian Casino Market

Regulation of the gambling industry is a hot topic right now. Countries like the UK, Spain and Sweden, that have been operating regulated markets for years, are currently tightening up their rules to combat problem gambling. Meanwhile, across the Atlantic, the US is embarking on a much more liberal era following the repeal of PASPA (the Professional and Amateur Sports Protection Act) to allow private sportsbooks and casinos to take bets online. Elsewhere, in Southern America, Brazil, Peru and Chile are also all currently drawing up frameworks for legal gambling.

Regulation is important as it provides consumer protection as well as establishing a means to tax spend that would otherwise be going offshore. In this article we examine the role of regulation in detail with respect to another new legal gambling market: Canada.

Background to Regulation in Canada

For decades Canada has had a complex relationship with legal gambling.

One hundred years ago, gambling was banned entirely under the country’s Criminal Code. But in the late 1960s, changes were made to that code to allow provincial governments to run lotteries as charitable fund-raising events. Over the decades that followed this concession to gambling was widened to allow state-run casinos as well.

In the online era, the provincial governments set up websites from which to run lotteries. An example would be the Ontario Lottery and Gaming Corporation (OLG.com) or PlayNow.com owned by the British Colombia Lottery Corporation. These sites offer consumers the chance to buy lottery tickets for weekly draws online, as well as play gambling games like slot and Blackjack.

Whilst provincial lottery sites like these accepted bets from Canadian players, a loophole in the law meant that private casinos and sportsbooks could also accept bets, as long as they weren’t based in Canada itself. This opened the door for offshore sites, many licensed in the European territories of Malta and Gibraltar, to do business in Canada, extracting betting revenues that would otherwise stay in the country.

Now all that is changing.

Legalisation of Single Event Sports Betting

The catalyst for change was the legalisation of single event sports betting in 2021. Prior to this date, Canadians were only legally allowed to bet on Parlay or Accumulator markets, effectively ruling-out sports betting as an industry entirely. After the law was changed, bets on the outcome of matches, in-play events, and many other markets became legal.

As a result, provincial lottery sites set up sportsbooks alongside their lottery draws and bingo and casino games.

And in a sweeping change to what had come before, this change in the law around sports betting was viewed as the right time to update the rules for private betting firms too. So, in 2021 provincial governments were given the all-clear to set up regulatory bodies and start issuing licenses to private gambling firms wishing to operate in Canada.

The first to do so has been Ontario, whose Alcohol and Gambling Commission of Ontario (AGCO) and subsidiary iGaming Ontario, opened their betting market up on 4^th April 2022, since which time more than 20 operators have been licensed and are now taking bets on casino and sports. It is expected that other provinces, including British Colombia will soon follow suit.

Why Has Canada Opted To Regulate In This Way?

These are huge changes that will see previous monopolies for government-run gambling sites challenged by the private sector. So why has Canada done this?

There are several reasons, and they provide an insight into why almost all countries are moving towards regulation in some form.

1. Offshore sites were operational anyway

Loopholes in the law meant that offshore sites were cashing in on Canadian gamblers anyway. Most countries, regulated or otherwise, experience difficulties with offshore firms who target their residents. In the case of Canada, it was worse because there was no established legal market anyway. So ‘monopoly’ for government lottery sites is a misnomer anyway.

2. A regulated gambling industry is a good way to raise tax revenues

Following the devastating impact of the pandemic, every government is in need of tax income. Gambling is an industry that can raise a lot of tax for the state. Under the previous laws, Canada was seeing vast amounts of potential tax syphoned to offshore territories. Just like it’s neighbour, the US, this was no longer a tolerable situation for Canada’s government.

3. Enforces sensible safe gambling measures

Whilst most offshore casinos are licensed in Malta and Gibraltar and follow pretty strict rules on safer gambling, regulation gives the Canadian state the opportunity to establish what it considers to be its own rules on what makes for a safe gambling environment. A good example of this would be Ontario’s decision to restrict the advertisement of ‘inducements to bet’ before a customer arrives at a gambling site. This effectively means a casino cannot run free spins marketing campaigns on TV, on Google, or on social media for example.

In future, the Ontario government may also choose to limit deposits or losses by player per week or month. This is an example of how the state can protect its vulnerable citizens using regulation, something that Canada could not do before the new framework was in place.

4. More Choice For Consumers

In Canada, just as in the UK, another well-regulated market, licensing gambling firms ultimately gives the consumer more choice. Canadians who wish to gamble legally can now choose from 20 or more legal sportsbooks and  online casinos in Ontario, mixing both state run lotteries and private betting firms like 888 or Bet365. And wherever they choose to bet they now know that they will be gambling within the law and seeing their wagering contribute taxes to their home economy.

Are There Any Downsides to Regulated Markets?

This case study shows how regulated online gambling can be beneficial on both a government and individual level. But are there any risks to regulation?

The biggest risk for regulated online gambling is that the state becomes too intrusive and restricts what licensed firms can offer. If the rules around advertising and how much a player can deposit, wager and lose become too strict, then some gamblers may be tempted away from legal sites towards black market ones who offer less protection and pay nothing in taxes.

Getting this balance right can be very tricky. As an example, the debate around soft-touch vs harder regulationv is currently raging in the UK, where tougher laws are on the cards in response to rising problem gambling statistics. But as the pendulum swings towards restriction on individual freedom, the risks of losing the benefits of a well-regulated market become greater. This is the most likely area where regulation can have a negative impact on the gambling industry.

For now, Canadian gamblers can look forward to a bright future as their government looks to continue down the path of sensible and reasoned laws and licensing.