The launch of regulated online gambling in Ontario is unique in the relatively short history of iGaming in North America. Consider the following:
- Ontario is the first jurisdiction to allow for a nearly open market for all comers in both online casino and sports betting.
- It’s the first Canadian province to break away from the lottery monopoly model for online gambling.
- This is happening against the backdrop of a longstanding gray market in which a variety of operators have served Ontario without regulation, and a public that’s well-accustomed to the idea of online gambling.
It all adds up to a fascinating case study that could result in a variety of outcomes. On the one hand, it might match or beat the traditional trajectory of successful launches in the United States. There are also various ways it could go wrong or produce an underwhelming result.
Here’s a look at the vision – clear or not – for online gambling in Ontario.
Articles in this series
A competitive online gambling market?
Ontario has been working on the idea of privatization for years. After Canada’s federal government ended the ban on single-game wagering, Ontario revealed that its market would be open to almost any interested operator. Doing so was almost without precedent, at least on this side of the Atlantic Ocean.
There is no US state where it’s come one, come all for both online casino and sports betting. In most states, the number of operators is artificially throttled. At worst, there is a de facto regulated monopoly for the lottery and a hand-picked operator. At best, the number of licensees is tied to the state’s land-based operators and how many separate brands each is allowed to partner with.
In Ontario, if you want to enter the market, you can apply to the Alcohol and Gaming Commission of Ontario (AGCO) for approval. That’s a competitive landscape that’s largely missing from the US. (We should note that New Jersey allows a lot of casino and sportsbook operators into the state, but it’s not entirely open).
The Ontario model
It’s important to point out that Ontario isn’t technically giving any operators direct market access. Canadian federal law requires that all gambling be “conducted and managed” by provincial governments.
To that end, Ontario has set up a new agency, iGaming Ontario (iGO), as a subsidiary of AGCO. In principle, it will conduct and manage all online gambling in the province, save for the existing operations of the lottery. These, it will continue to conduct, manage and operate as usual, through its site OLG.ca.
The private sector operators, for their part, aren’t getting licenses to serve the market directly. You’ll see that language used frequently as a shorthand, but legally speaking, it’s not quite correct. Rather, operators are getting approval from AGCO to sign operating agreements with iGO.
In principle, these operators are simply offering products on behalf of iGO, the same way many Ontario retail casinos are owned by the lottery but operated by private companies like Great Canadian Gaming on its behalf.
Can any online gambling site really get into Ontario?
Ontario is launching an open white market: An online gambling regime where operators have explicit permission to operate, make payments to the government, and are (in theory) held accountable to regulation.
To date, Ontario and other provinces have been a gray market. By this, we mean that offshore online gambling is not expressly legal, nor is it expressly illegal. There has been no regulation, but nothing stopping an offshore online casino or sportsbook from serving Ontario, either.
AGCO is attempting to onboard the gray market. It seems willing to consider any operator for entry to the new white market, even one that has been functioning as a gray market operator until now.
Will every gray market operator take up that possibility? Almost certainly not. But many of the biggest companies that operate in regulated jurisdictions around the world are joining the regulated market, the biggest among them, Bet365.
Is every operator suitable for AGCO approval? Clearly not. Some offshore operators like BetOnline, Bovada and MyBookie serve markets like the US, where there are clear laws against it. These are black market operators, not gray market operators. They would likely not be welcomed to the regulated market, even if they wanted to join it.
Still, Ontario will likely be the most wide-open regulated online gambling market in North America when everything is said and done.
Why is an open, regulated gambling market good?
Ontario’s model creates a competitive landscape that is in an ideal world the best for consumers, where you can choose any app or site that sees fit to serve the province. You aren’t limited to a single online gambling app, or a handful, or just the ones that paid for market access in “x” state. Those three scenarios are generally how things have played out in the US.
The market also doesn’t choose winners and losers right out of the blocks. That said, the gray market operators will begin with the advantage of having served Ontario bettors for years.
In theory, the open, competitive market allows operators with the best UX, best offers, best customer retention, best odds, best game selection, etc. win out in the long run. This beats a system which chooses winners before things even get started. Competition is good in every other industry in the world. The same can be said for online gambling.
This is borne out in the US. States with lottery monopolies or strict limits on the number of operators have tended to underperform more open markets.
What will Ontario online gambling look like?
There are many uncertainties surrounding Ontario’s plan. It seems unlikely, however, that it will look like a normal launch in the US. These usually come with widespread customer adoption at the starting gate, but Ontario’s pivot from gray to white market operations may be a more gradual transition.
The idea is largely to bring the gray market operators into the white. The operators already serving Ontario will now just be making payments to the government and operating within a regulatory framework. They already have lots of customers, so there’s not likely to be the same level of new customer acquisition from day one.
Still, the new sportsbooks and online casinos in the market will do their best to make a splash. The biggest US operators, in particular, are likely to spend heavily in the market. Their goal will be to cut into the marketshare of the existing operators. There are also other competitors who seem to be focused more granularly on the Canadian/Ontario market, such as theScore. These factors are covered in more detail in Parts III and V.
Will it all work? In the long term, it should, if Ontario can survive the legal difficulties we’ll get to in Part VI. At the very least, the province has positioned itself at the starting line for allowing for competition to create a vibrant regulated market.
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