Online gambling companies in Canada speak out at Canadian Gaming Summit

Last week, the SBC Canadian Gaming Summit was held in Toronto and one of the discussion points in the sessions revolved around unlicensed, offshore operators that continued to operate in Ontario. The sessions noted that despite assurances by the Alcohol and Gaming Commission of Ontario (AGCO) and the Attorney General that there would be severe ramifications to operators that didn’t apply for an iGaming Ontario license and continued to operate illegally, nothing of such has transpired. Instead, unlicensed sportsbooks and casinos still cater to Ontario residents and worse are still able to advertise on TV, radio and on social media sites with no ramifications.

A slide shown at the conference on iGaming Market Channelization rates across Canada indicated that approximately 84% of bets made in Ontario were with legal sites compared to British Columbia which had 24%, Quebec which had 27%, Atlantic Canada which had 10% and Alberta, which only had 10% of customers playing with legal sites. Manitoba wasn’t shown on the slide but it’s likely close to 25% since they are  part of a gambling coalition with Quebec and British Columbia which use Playnow as the only official legal operator. Speakers in other sessions seemed to believe the legal channelization rate in Ontario was closer to 80%, since it’s impossible to know exactly how much is bet with crypto sites like Stake.us, but this still means that 15% to 20% of Ontario customers are betting with non-licensed sites, which according to the slide was costing Ontario about $757 million in lost Gross Gaming Revenue (GGR).

Manitoba steps up

The province of Manitoba took action in February of this year when Manitoba Liquor and Lotteries (MLL) asked for an injunction order with the Manitoba Court against the owners of Bodog and its domains, demanding that the company cease all efforts to operate in Manitoba. On May 26th, the courts ruled for MLL and demanded that Bodog "cease operations in the province and exit it entirely." In better words they wanted to make sure Bodog could not operate the real money Bodog.eu site or the play for free site bodog.net in the province of Manitoba. Although the courts could only enforce the ruling in Manitoba, MLL was representing the Canadian Lottery Coalition  with the three provinces mentioned earlier, so this ruling now provides a basis for the coalition to try and get the courts in British Columbia and Quebec to follow suit. The courts ordered the operator to leave Manitoba immediately and told advertisers to stop hosting ads for the website. Whether that will be sufficient to convince Bodog to stop taking customers in those three provinces is yet to be seen although a session on the legality of the case indicated that the .net site would probably be deemed legal since the players can’t play with real money on it. The ruling also had no enforcement actions attached to it, so like Ontario, which issued a similar warning to Bodog and advertisers to stop operating in Ontario, it will wait to be seen if there are any real effects of the ruling or whether the threat will just be ceremonial and advertisers will put profits first.

In the opening session of the conference Ontario Attorney General Doug Downey stated: "The market's matured enough now that people have had an opportunity, and if they're not going to go through the door, it's time that they stop playing in our market."

He went on to suggest that this could involve putting more pressure on media sites and payment processors to stop working with offshore operators.  But again there were no specifics and the province has a history of making threats and not acting on it. In the first SBC Gaming Conference after the open market went live in 2022, the province told offshore operators that they had six months to obtain an iGaming Ontario license or else they would be shut out for good. In response, companies like Pinnacle and Sports Interaction got a license, while at the same time they continued to operate grey market sites in the rest of Canada. Bet365, Betway, Betano and a host of others did the same. But the six month deadline was hardly adhered to as the province continued to license operators for at least a year after and this statement seems to suggest that the province may still accept offshore operators and give them a license if they pay the registration fee. Stake is on the list of operators that just stopped taking bets from Ontario residents in expectation of getting an iGO license. Moreover, while 80% channelization looks good on paper, it is hardly something to be celebrating considering the market is over 3 years old.

I spoke with Richard Roberts, the President of Mohegan Digital who said that 80% just isn’t good enough.

"If 20 percent of the market is illegal, this causes challenges for the legal operators. Legal operators spend a lot of money on AML, responsible gaming, problem gambling, age verification and once the player has the chance to bet illegally, all those efforts are compromised. If a player is excluded from our platform (due to violations of the Ontario Standards), the player can play with any of the illegal operators. The illegal operators are money laundering through online gaming, and they bring the money right back into the Ontario market. More must be done to solve the problem all the legal operators want fixed."

Roberts said he has spoken with the Ontario regulators about efforts in US markets to stop illegal operators.

"U.S. states are acting against the illegal operators. They’re sending out cease and desist orders to illegal operators. They’re going after them through game vendors, suppliers, and the payment processors. But in Ontario they’re just letting them operate and advertise on TV as a licensed operator. Jim Warren said on a panel that these operators are illegal but what is being done to eliminate them?"

As for what can be done, Roberts said, "if Ontario can get the payment processors to stop accepting transactions for the illegal operators, that would be a great start.  They have to know where the transactions are coming from, and it is an AML issue.” “If there’s no money in the system people can’t gamble. Also, those supplying game content to the illegal operators should be penalized to where they cannot participate in the legal Ontario market."

Spoofing of legit sites

Roberts has an additional reason to be concerned as many of these illegal sites are spoofing land-based casinos and pretending to be Fallsview or Casino Niagara and offering free spins, when in fact they are illegal casinos operating in the Caribbean. One company called WinSpirit, based in Curacao using processors in Cyprus, is known for this. Along with Fallsview and Casino Niagara, WinSpirit also has similar ads on social media pretending to be Casino Rama, Casino Woodbine, Pickering Casino and Windsor Casino. These land-based casinos are operated by Mohegan, Gateway Casinos, Great Canadian Gaming and the Windsor casino is owned and operated by Caesars. Yet the AGCO refused to do anything about them and refers complaints to the Ontario Provincial Police. For their part the OPP issued a statement telling customers that ads to sign up for an account at Casino Rama are fake, but that obviously doesn’t solve the issue. So, for his part Roberts hired a company to track down these social media posts and block them. Unfortunately, he said they just keep reappearing in different media and with different URLs so it’s effectively a game of whack-a-mole. And this is critical for Mohegan since the physical resort casinos are their bread and butter and the online apps support traffic to the land-based operations. So, any negativity as a result of a fake website pretending to be Fallsview Casino or Casino Niagara could come back to hurt them.

As a last question, I asked Roberts if he had regrets about entering the Ontario market and he said no, but he was disappointed that the Standards did not consider the omnichannel. He said he finds it challenging that the online operations are considered separate from the land-based operations.  Fallsview Momentum cardholders cannot be marketed to by the online business. Ontario is the only location that has that rule in place that requires separation of the land based and online operations.

So, there was a lot of discussion at the SBC Gaming Conference related to illegal gambling operators in Ontario and the Attorney General said the province is prepared to do something about it. But actions speak louder than words and as of today there have only been warnings with no concrete plans to force the issue. Is the answer as Roberts suggested to go after any payment processors that help contribute to money laundering and hence cut off the head of the snake? I’m not sure.

U.S. efforts

In 2006, the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA) which made it illegal for banks and payment processors like Western Union to fund illegal gambling operations, but a lack of explicit direction on how to do so and the full list of illegal operators led to most banks and processors to simply block payments for all gambling transactions, including horse racing, lotteries and legal casinos. They said they were given an impossible task so it’s better to block all sites listed as gambling. That of course led to the rise of cryptocurrency as the preferred method of payment in the United States for gambling and the offshore industry is still thriving. Mind you in Ontario since it’s only one province compared to 50 states, it would be easy for the province to tell the payment processors that only payments for these licensed 50 processors and Woodbine Entertainment are legal. Everything else must be blocked.

One thing is certain, until concrete methods are taken to stop offshore gambling, it will continue to prosper and not only will the province lose a lot of revenue but they also will have no way to ensure that all gambling in the province is done responsibly. The decisions by Ontario will set the standard for the rest of the country, including Alberta, which hopes to go live with an open market next year. Consequentially, what actions the AG and AGCO implement to cut off funding at the source for illegal operators are being watched and monitored carefully across the country. And if done right and effectively, Ontario could be a model for the rest of the world who are having similar problems with unregulated, often rogue, operators.

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