Disclaimer of Liability

The information contained in the materials distributed or otherwise provided by the Province of Ontario (the "Province") in respect of this matter is for general information only. You should not rely upon the material or information provided as a basis for making any business, legal, financial or any other decisions. The Province makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the materials or information for any purpose. Any reliance placed on such material and information is therefore strictly at your own risk.

Introduction

The Government of Ontario is committed to establishing a new online market for internet gaming (iGaming) that is both competitive and protects consumers. A competitive iGaming market in Ontario will foster a collaborative and regulated relationship with private sector operators, while adhering to Criminal Code requirements and creating conditions that protect the public interest. This will also enable Ontario to capture new revenue in the future and generate returns for the Province.

Soon to be established Alcohol and Gaming Commission of Ontario (AGCO) subsidiary

In continuing to work towards these goals, the Government of Ontario announced in its November 2020 Budget that, in addition to regulating Ontario's existing gaming market and a new iGaming framework, a subsidiary of the Alcohol and Gaming Commission of Ontario (AGCO) will be established to conduct and manage the new iGaming market in accordance with the law.The AGCO Registrar's regulatory role will remain unaltered and entirely separate from the commercial role in the conduct and management of the iGaming market. The governance structure will be designed to avoid potential real or perceived conflicts of interest.

Moving forward and designing Ontario's iGaming model

The Province and the AGCO are now moving forward with engagement on the design of the new iGaming framework that will: foster an exciting gaming experience that prioritizes consumer choice, create a competitive marketplace to promote business growth and combat the unregulated market, ensure market integrity and safety; and provide Ontarians with robust consumer and responsible gambling protections.

The iGaming initiative augments the lottery and gaming offerings currently available to adult Ontarians. The existing lottery and gaming market is an important source of revenue for the province, municipalities, First Nations communities and charities. It is also a critical economic driver for Ontario. Ontario is committed to continuing to explore the online gaming market as a viable opportunity for both Ontario and the private sector to realize financial returns and accelerate recovery from the adverse impacts of COVID‑19.

For more than a decade, gaming revenues shared with First Nations communities have supported community development, health, education, economic and cultural development. The Province will be engaging with the Ontario First Nations Limited Partnership which represents the gaming interests of 132 First Nations in Ontario as a signatory of the Gaming Revenue Sharing and Financial Agreement (GRSFA), regarding how revenues from the iGaming market could be shared. In addition, the Province invites Indigenous perspectives on the design of the iGaming market and input from Indigenous organizations and Indigenous businesses involved in gaming and iGaming (for example, operators, suppliers, etc.).

Purpose of this discussion paper

The government is committed to working with the industry and key partners to develop a new competitive framework that supports shifting customer access from the largely unregulated online gaming market to a regulated market with increased consumer protection measures. It is important to hear perspectives from operators and suppliers, Indigenous organizations and First Nations, responsible gambling advocates and other key parties, including OLG, to build a model that will work for Ontarians, provides opportunities for private sector economic growth, and generates returns for the Province.

This discussion paper outlines the government's preliminary thinking on key aspects of Ontario's iGaming model that will be regulated by the AGCO as well as conducted and managed by a subsidiary of the AGCO. Your feedback on these components, and any issues not directly addressed in this paper, are critical as Ontario moves forward with the framework.

Additional engagement by the AGCO on technical components of the iGaming framework

Please note that the AGCO will be seeking input on operational issues (for example, game testing, data capture and storage, etc.) and regulatory standards separately, and will provide more details on these engagements as they become available.

How to respond to this discussion paper

Written submissions on the key components of the model design, or any other design considerations not outlined in this paper, are welcome and can be provided to iGaming@Ontario.ca. We invite interested parties to submit any written feedback by April 16, 2021.

Context

Public engagement to date

Following the Province's announcement in the 2019 Ontario Budget to pursue work on an iGaming framework, the Ministry of Finance, in collaboration with the Ministry of the Attorney General, hosted roundtable sessions with gaming stakeholders to broadly discuss a model for iGaming in Ontario. Subsequently, the AGCO held technical engagements with key operators and suppliers from the iGaming sector to understand what technological solutions the sector had (for example, data storage options and location verification tools) to support the development of an iGaming model for Ontario.

Since these initial discussions, COVID‑19 has had a significant impact on the gaming sector in Ontario and across Canada. Over the summer, the Minister of Finance, and the Attorney General hosted a roundtable with iGaming operators to hear directly about how COVID‑19 was impacting the sector. This session was an important opportunity to connect with potential future partners and learn more about emerging trends, and the importance of market and product diversification as a strategy for navigating uncertain times.

In November 2020, following the update in the 2020 Ontario Budget, the Province provided a technical overview of the legislative amendments to enable Ontario to establish the AGCO subsidiary responsible for conducting and managing iGaming.

Objectives

Today, the vast majority of internet gaming wagers are placed by Ontarians on websites that are not regulated in Ontario, which may provide limited secure and reliable safeguards for users, inadequate age gating, and limited responsible gambling resources. The objectives underlying the development of the iGaming model for Ontario are:

1. Consumer choice

  • Introduce fair competition in the regulated online gaming market in Ontario to improve the online gaming experience for consumers
  • Enhance entertainment choice for consumers
  • Respond to consumer preferences

2. Consumer protection

  • Ensure safe and responsible play, and game integrity
  • Prevent underage access
  • Ensure compliance by operators with applicable laws, including compliance with anti-money laundering (AML) rules and regulations and compliance with relevant privacy and information security laws

3. Legal market growth and provincial returns

  • Leverage private sector expertise
  • Unlock opportunities for private business
  • Address the unregulated iGaming market
  • Capture provincial revenue that would otherwise flow to other jurisdictions
  • Reinvest new provincial revenue in priorities that benefit Ontario

4. Reduce red tape

  • Enable innovation and speed to market
  • Reduce regulatory burden on business
  • Establish commercially reasonable and equitable regulatory standards and requirements

Legal framework

Canada has a unique legal framework for gaming. The Criminal Code expressly prohibits the provision of gambling in Canada, with some limited exceptions. One of those exceptions, in section 207(1)(a), is for lottery schemes that are "conducted and managed" by provincial governments. Historically, the conduct and manage role has been interpreted as being the "operating mind" of the lottery scheme being offered (for example, having the capacity to control the lottery scheme). This requires a more rigorous and complex framework for gambling in Canada than what operators may be used to in some other jurisdictions where gambling is permitted.

The OLG is currently the only provincial agency in Ontario authorized to conduct and manage "lottery schemes", the Criminal Code terminology covering all gaming products, including lotteries and iGaming. This broad mandate includes conduct and management over land-based gaming, lottery, iGaming and components of charitable gaming. As such, the OLG is currently the only legal provider of commercial gaming in Ontario and operates its own iGaming website, at OLG.ca. Following the establishment of Ontario's iGaming framework, the OLG will continue to conduct and manage lottery schemes including its own online gaming operations, while the AGCO's subsidiary will be responsible for the conduct and management of all other iGaming.

Discussion Topics and questions

Building on its strategic objectives, as well as Canada's legal requirements and insights gained from previous stakeholder engagements, the Province is seeking input on the following elements and options for inclusion in the final iGaming model:

1. Potential approaches to iGaming revenue sharing

The Government of Ontario is committed to establishing a new online market for iGaming that is competitive and commercially viable for operators interested in participating. The Province plans to introduce a revenue collection approach that is simple to implement. The approach must be consistent with the Criminal Code.

Several jurisdictions in Europe and the United States with established regulated markets for online gambling rely on domestic internet gaming taxes to collect revenue from iGaming operations. However, given Canada's particular legal framework, Ontario is considering a revenue sharing model in which the AGCO subsidiary would enter into commercial agreements with private operators, on behalf of the Province. These commercial agreements could enable private operators to offer their games directly to consumers within a regulated framework, in exchange for a defined revenue share paid to the operator.

Under a revenue sharing approach, the Province is considering different options for revenue sharing rates. This could include a single rate that would be applied to gross gaming revenues (which refers to amounts wagered less winning payouts) across all product lines or varying revenue share rates, applied across different product lines to reflect differences in profit margins, elasticity of demand, and future market potential.

Recognizing the Criminal Code obligations for conduct and management, the AGCO subsidiary would need to have a direct amount of oversight of iGaming revenues. One approach the Province may consider would require registered operators to track proceeds from Ontario players and set up a dedicated bank account for revenues generated from Ontario players, jointly with the AGCO subsidiary. A share of the revenue from these individual dedicated accounts could be provided back to the applicable operator by the AGCO subsidiary on a regular basis based on the determined revenue share amount as established in the commercial agreements.

In considering these approaches, the Province is seeking input on the following questions:

  • What are the key considerations for stakeholders on operating under a revenue sharing approach?
  • If you are an operator, have you used revenue sharing agreements in other jurisdictions? If you answered yes, how are those revenue sharing agreements structured?
  • If you are an operator, do you prefer a universal rate, varying rates, or another approach? Please explain.
  • In your opinion, what are the anticipated impacts on profitability and market entry decisions of operators for a universal rate versus a rate varying by game type? What impacts might the final revenue-share rate approach have on the overall market size or diversity?

2. Key components of the commercial agreement

In addition to setting out financial terms, as discussed above, the commercial agreement would allow the operator to operate an iGaming site and include provisions to demonstrate that the AGCO subsidiary has appropriate operational control, per the conduct and manage obligations under the Criminal Code. A signed commercial agreement with the AGCO subsidiary will be required in addition to registration by the AGCO and could include commitments to meet the Registrar's Standards for Gaming and all other applicable laws and regulations.

In addition to revenue sharing and financial terms, the agreements could include a set of common parameters applied to all operators, potentially including the following:

Player registration and game performance data

Initial registration and login requirements are an important means of verifying a player's identity, age, and location, to ensure they are eligible to access a site. Location verification would be required to ensure that players accessing the site are located within Ontario. Operators could use their own portals for player registration and login. However, the Province may outline expectations for player account management, including standards for registration and account creation, and aspects such as geo-location verification and reporting requirements. Where applicable, these expectations would be consistent with the Registrar's Standards for Gaming.

Commercial agreements could also set out requirements for player data capture, use and retention as well as data sharing with the AGCO iGaming subsidiary, in a safe and reliable manner. Sharing data on player registration and game participation would help the Province monitor activity and evaluate the effectiveness of the iGaming model's performance as the market grows. The AGCO will engage with interested stakeholders on the operational components of these requirements, including data capture and storage standards.

Consumer protection and financial integrity

Consumer protection and the security and integrity of Ontario's iGaming framework is, and will continue to be, a priority. The Province understands many operators currently rely on payment systems from well-established multi-national providers, and it is anticipated that AML and anti-fraud requirements would align with existing industry best practices, as well as obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada). The intent is, if possible, to enable operators to take advantage of existing systems or third-party offerings that can comply with standards and policies relating to funds management, responsible gambling, AML and anti-fraud measures.

Responsible gambling measures

Access to safe and secure gambling with responsible gambling features is an important consideration as work progresses to develop a new model for iGaming. While many operators may already have responsible gambling measures in place, the Province intends to build on the AGCO's existing standards and define responsible gambling program requirements, gaming features and policies that operators would be required to implement for all Ontario players.

Strong identity and age verification processes are important responsible gambling measures intended to protect underage consumers and those who have self-excluded from online gambling by preventing them from accessing operator websites. Measures are expected to include restrictions on marketing and game designs so they do not appeal to minors, strong identity and age verification processes, and requirements for voluntary self-exclusion.

Compliance with accessibility standards

In order to support equitable access to gaming, including for Ontario players with disabilities or accessibility challenges, the Province will require registrants to adhere to the standards outlined under the Accessibility for Ontarians with Disabilities Act, 2005 (AODA).

The Province is seeking input as follows:

  • In general, what are the key considerations for stakeholders regarding requirements that could be included in commercial agreements?
  • What key considerations should the Province be aware of related to:
    • Player registration and game performance data?
    • Consumer protection and financial integrity?
    • Responsible gambling measures?
    • Accessibility for players and participants?

3. Potential categories / types of games to be included in the model

For the categories of games included in the framework, standards outlining technical requirements would be set for individual offerings. To help ensure game quality meets the standards in place for Ontario players, the systems and products of individual suppliers would be required to be certified for compliance with the standards by a gaming laboratory that is recognized by the AGCO prior to being launched in the market. Where appropriate, testing would align with the standards in other jurisdictions to leverage existing clearance as much as possible.

While well-established casino and table games (for example, online slots, blackjack, roulette, etc.) would be permitted, as long as they meet Criminal Code requirements, lotteries likely would not. OLG is, and will continue to be, the only entity authorized to conduct and manage all lottery offerings in Ontario, which does not include parlay-based sports betting which will be opened up to other operators. Product categories currently under consideration for inclusion in Ontario's iGaming market include:

Sports wagering

Currently, all provinces offer parlay-style sport event wagering (meaning, a minimum of two events combined), such as ProLine in Ontario offered by OLG. The Province intends to ensure that parlay-style wagering for traditional sports events can be offered in Ontario's iGaming market.

The Province also recognizes that the ability to offer single event sports wagering is an important component of an internet gaming strategy. Single event sports wagering is currently prohibited under the Criminal Code. In November 2020, the federal government introduced Bill C-13 - An Act to Amend the Criminal Code (single event sport betting), to allow fixed-odds betting on the outcome of single sporting events, with the exception of horse racing. If legalized, this change would allow Ontario customers to bet on the outcome of a single sporting event. If passed, single event sports wagering would allow for opportunities to bet on a wider range of sports games, including in-game events. Legal single event sports wagering would be a critical component of Ontario's iGaming model and help support the growth of a competitive iGaming market in the Province.

Novelty event wagering

Novelty betting is an emerging trend that is growing in popularity where players bet on the outcome of non-athletic events, such as the Oscars, elections, or even the gender of a royal baby. In Canada, a number of other jurisdictions (Atlantic Canada, British Columbia, Quebec, and Manitoba) offer some form of novelty betting. In working to develop an iGaming framework that offers a diverse array of products that meet consumer preferences, the Province is interested in hearing feedback from stakeholders on what types of novelty betting might be beneficial to include or exclude from the Ontario iGaming market.

Peer-to-peer games and offerings

Well-established peer-to-peer games and offerings, such as poker, would be permitted in Ontario's iGaming market. The Province welcomes feedback on whether less traditional offerings, such as peer-to-peer sports betting through a betting exchange (subject to the legalization of single-event sports wagering), have been a popular offering in other jurisdictions. Unlike traditional sports betting, where bettors place wagers against established bookmakers, betting exchanges allow bettors to effectively become bookmakers themselves and place or accept wagers from other bettors. Please be advised that such less traditional offerings may not be consistent with the Criminal Code.

The Province understands that an important feature of some peer-to-peer games and offerings is pooled liquidity, which allows players across different jurisdictions to play together and compete for combined jackpots. While, at the time of market launch, pooled player liquidity for lottery schemes conducted and managed by the AGCO subsidiary would be limited to such schemes occurring solely within the Province of Ontario, per Criminal Code requirements, Ontario will prioritize advancing opportunities for greater pooled liquidity going forward.

Ontario looks forward to working with the federal government on opportunities for broadening the rules in the Criminal Code regarding pooled liquidity in the future. The Province will also explore the possibility of entering into "shared liquidity" agreements with other Canadian provincial governments, which could pool players with players in those other provinces. This approach to pooled liquidity across provinces is currently allowed under the Criminal Code. The Province is seeking feedback on product categories that could be considered eligible for launch, after an operator has been registered by the AGCO and obtained authorization from the AGCO. Specifically, the Province is interested in hearing about:

  • How do operators currently classify or categorize different games internally?
  • What steps or processes do operators undertake when reviewing a new game from a supplier to ensure that it is fair and reputable for their users?
  • Are there any specific products or offerings the Province should consider including or excluding from the Ontario market?
  • What kinds of novelty betting, if any, should the Province consider including?

4. Interaction between Ontario's new iGaming framework and land-based gaming and charitable gaming in Ontario

In developing its iGaming framework, the Province intends to create a model that will be open to current and potential operators including Ontario’s existing land-based gaming operators, subject to any existing contractual obligations they may have. While partnerships between iGaming operators and land-based gaming service providers would be welcome, they are not being contemplated as aa requirement for private-sector operators to participate in the final framework. To ensure the market is open and accessible to a variety of interested registrants and is driven by market and consumer demand, the Province does not intend to place any cap or limits on the number of operators that can register in the market. The Province also does not plan to provide any preferential treatment to land-based operators in accessing Ontario’s new iGaming marketplace.

The Province is committed to striking an appropriate balance between developing an iGaming market that is open and competitive and that takes into account the role of established land-based gaming operators in Ontario currently operating and investing in the Province. The Province also recognizes that First Nations with land-based gaming sites on their lands may have unique interests in the new iGaming framework and welcomes their perspectives.

The Province also recognizes the different operating and legal requirements under the Criminal Code relating to electronic gaming for licensed charitable or religious organizations. Traditional charitable gaming products, such as bingo and raffles, provide a valuable source of revenue for many charities in Ontario. The Province is working to assess the potential impacts of legal online bingo and related products on charitable gaming and welcomes feedback to inform that assessment.

  • What opportunities do land-based operators see with respect to iGaming?
  • What concerns, if any, do land-based operators have about potential impacts iGaming could have on the land-based gaming sector?
  • What best practices can land-based gaming operators share about their experiences adding online or digital lines of business?
  • Do operators who solely offer iGaming products anticipate any impacts or interactions with the land-based gaming market?

Next steps

Thank you for your interest in the Province's continued efforts to establish an open and more diverse iGaming market in Ontario. The Province will be setting up virtual discussion sessions in late March 2021 to hear feedback directly and to answer any questions interested stakeholders may have.

If you are interested in participating in a discussion session, or have any questions relating to the written feedback submission process or the content of the paper, please email iGaming@Ontario.ca.

All feedback will be used to inform the design of the Province's iGaming framework, which is expected to be finalized by fall 2021 to allow operators to launch games by the end of the year.