Canadian courts to allow comingled betting pools

One of the hot topics at the last two Canadian Gaming Summits focused on a request sent by the Ontario government to the Ontario Court of Appeals asking if it’s ok for the province to allow gamblers outside Ontario to bet into their pools. In February 2024, the government sent an order in council to the Ontario Court of Appeals asking whether there was a pathway for the Ontario government to allow players outside of Ontario to bet into pools that also contain players from Ontario. The exact question was as follows:

"Would legal online gaming and sports betting remain lawful under the Criminal Code if its users were permitted to participate in games and betting involving individuals outside of Canada? If not, to what extent?"

 he purpose of the request stemmed from complaints by many former daily fantasy sports players who wanted the product back (DraftKings and FanDuel ceased offering DFS to Ontario when they launched licensed and regulated sports betting in April 2022), as well as companies offering poker in Ontario who said that the Ontario pool was too small to facilitate good tournaments and keep tables full. If the answer by the courts was that international players were ok, then then those products had a far rosier outlook in the province. Moreover, the Ontario government hoped that if it could significantly increase pool liquidity then it would possibly convince Ontario bettors still wagering offshore (last estimated at about 20%) to come to the regulated market and could also lure some bettors who have been sitting on the sidelines to start wagering at Ontario licensed sites. No doubt the province also hopes it will encourage some poker and DFS companies that have not applied for an Ontario license so far, to do so. The province felt that by going directly to the appeals court they would get a final answer and could launch right away. The court heard the case in November 2024 and said they would make a ruling within a year.

Favorable Court Ruling

Last week the court finally gave its ruling and by a 4 to 1 decision said that Ontario could indeed comingle its pools with foreign jurisdictions so long as the gambling was controlled within the province by iGaming Ontario or its agents. The courts also required that Ontario exclude other provinces unless that province signs an agreement with Ontario to mingle pools. The ruling was significant and could be a game changer for Ontario because it increases liquidity to a point that it makes offering the product viable.

For Daily Fantasy Sports, as an example, one of the biggest contests each Sunday during NFL season is the 'Millionaire Maker' contest where for a fee of $20, the winner of the contest would take home a million dollars. There were also subsidiary prizes and usually about 200,000 people entered the contests. With Ontario only, however, the province would be lucky to get 1,000 people entering the contest making it unfeasible to offer a millionaire market and the prize would probably be less than $10,000 to the winner. With European, Asian and possibly American customers also playing into the same pools it becomes very feasible. And to facilitate it, the process could be as simple as DraftKings, FanDuel and possibly Yahoo Fantasy just taking off the geo-restriction for Ontario, since prior to 2022 Ontario players were already betting into that same pools as Americans were.

DraftKings and FanDuel would also likely be open to relaunching  DFS because the tax implications that were cumbersome before, would be lifted. In the past when a Canadian customer won a  large contest it required the Canadian bettor to fill out a W8-BEN form and the company also had to send out a W2-G  for the win to Canadians who usually threw the slip in the garbage, although it brought on questions as to whether the Canadians were required to pay the tax since it was an American contest. But if the betting is clearly conducted in Ontario by iGaming Ontario, then  the tax implication is no longer there.

New ruling may entice other companies to get into the game

About a year ago Bet365 started offering a free to play DFS contest to its customers in Ontario that it called ‘Daily Lineups’. I inquired with the company about it when they first launched Daily Lineups and they said it was being run by an outside company, but was something Bet365 wanted to try out. About a month ago Bet365 abruptly stopped offering daily lineups and with this court ruling coming out, one must wonder if Bet365 was trying to see if there was interest in the product for a possible launch, knowing the court ruling was imminent and took it off the board for the time being. It should be noted that The Fantasy Sports and Gaming Association said there was about 2 million active DFS players in Ontario in 2021 before FanDuel and DraftKings shut it down, although the number of players betting a specific market was much smaller.  Plus, there was far more interest in team sports than on individual sports like golf or NASCAR.

Poker may see the most benefit

Yet as important as the ruling is for DFS, it could be even more impactful for online poker. There were several thousand poker players in Ontario before 2022 mostly playing at sites like PokerStars and 888, and right now there are five sites offering poker in Ontario - PokerStars, GGPoker, Party Poker, BetMGM and 888. Each site averages between 200 and 400 players per day ,which means unfilled tournaments and empty tables, particularly during the day when  people work or in the early hours. One of the big advantages of sites like PokerStars when it was international is that the different time zones meant there were always people interested in playing.  The hope with this ruling is that if players from outside Ontario can now join in to the cash games and tournaments, tables will remain full 24/7 and  tournaments will be more frequent, including satellite tournaments for entries to land-based tournaments such as the World Series of Poker.  International players will also make it more feasible to have larger jackpots and tournaments for slots and blackjack. It should be noted that even though Ontario said it would not be opening the markets to any other Canadian province, that will likely change next year after Alberta creates an open market and will want liquidity as well, joining with Ontario.

So, Ontario has been given the go-ahead but there are still questions to be asked including the following:

 -- Which jurisdictions does Ontario want to work with to allow the international players?
 -- Will the other jurisdictions, including U.S. states, would be interested in comingling pools with Ontario?
 -- How can Ontario control the gambling if the pool originates elsewhere, particularly since the legal gambling age changes between jurisdictions?
 -- Will geolocation tools like Geoguard be able to weed out some jurisdictions and not others?
 -- How can Ontario make sure they get their share of the taxes from the products?
 -- Will the operators (particularly DFS) have any interest in relaunching in Ontario?

I sent letters to DraftKings and FanDuel asking them that last question but have not received a response. That said, there is little doubt that before Ontario began this process, they asked the question to the companies mentioned and likely were told  they would be on board if the court allowed larger pools.

At the same time, it’s well known that DFS has never been a big money maker for either DraftKings or FanDuel. In 2014 both companies increased entry fees and lowered payouts on contests due to mounting losses. And in 2016, FanDuel and DraftKings announced plans to merge in an effort to cut down on expenses by combining resources and cutting back on the need for competitive advertising. It was only when the U.S. Supreme Court overturned PASPA and states said they would give sports betting licenses to DraftKings and FanDuel that it created renewed life for each site to continue. So, the companies will have to ask themselves if it’s worth their while to relaunch the DFS product in Ontario. The answer of course will be based on whether it will help drive people to their other products like sports betting, casino and prediction markets and whether it will help them have a bit of a niche over competitors. They may also want to launch it to keep the likes of Underdog Fantasy from gaining an advantage as the only DFS company in the province.

So, the decision by the court is very significant but that doesn’t mean that gambling companies will start offering their products to other jurisdictions tomorrow. Even though the Ontario Court of Appeals said it was ok, there will likely be other jurisdictions and anti-gambling groups appealing that decision - meaning it could go the Supreme Court of Canada. And while it’s likely the Supreme Court will rule with Ontario there is also a chance they may not and instead will side with the lone dissenting judge who said that what Ontario wants to do is not legal because, in that judge’s opinion, to be legal, everything  must occur completely within the province, but since money is pooled between players in Ontario and players outside Ontario, the betting is not completely inside Ontario thus making it illegal per Canadian law.

I'll be here reporting for OSGA to ensure that global gamblers everywhere are updated on the situation as it proceeds.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!