The Ontario Court of Appeal heard this week from legal representatives of various parties on Ontario’s reference question about whether it would be legal for online gamblers based in the province to play peer-to-peer games against rivals based outside Canada.
Since Ontario’s legal iGaming market launched in April 2022, operators offering DFS and online poker have been restricted to Ontario-only player pools. The limitations led to DFS giants FanDuel and DraftKings pulling their DFS product in the province. Now, the province wants to know whether it can offer international liquidity for online DFS and poker play, thereby connecting players in Ontario to players outside Canada, without contravening the Criminal Code.
Over the course of three days this week, the court heard from counsel on behalf of the Ontario Attorney General’s office (AG), the Canadian Gaming Association (CGA), FanDuel owner Flutter, iGaming consulting group NSUS, the Canadian Lottery Coalition (CLC) and the Mohawk Council of Kahnawà:ke (MCK).
A decision could take weeks or even months to arrive. In the meantime, here’s a whistle-stop tour of what was said this week.
Ontario: one game or two?
A key debate hinged on the mechanics and the semantics of a “game” of international play.
Ontario’s government argues that if in-province players were allowed to play against competitors outside Canada, it would be one game made up of two “schemes”: one inside Ontario married to one outside Ontario.
“Our position is that the game is two schemes interacting with each other.”
Counsel for the AG, Josh Hunter
Though liquidity would be pooled, Ontario would retain regulatory oversight of the in-province game, while the foreign play would be conducted by that jurisdiction’s regulator. Ontario could decide which jurisdictions those are, negotiate game-by-game agreements with its counterpart regulator(s) and even determine what happens to every cent of revenue from the Ontario scheme, said McCarthy Tétrault’s Adam Goldenberg, speaking on behalf of the CGA.
All of this, stressed Hunter and his fellow AG counsels on Tuesday, is a key part of what should make international liquidity legal.
The lotteries do not agree. “They are one game,” countered Matthew Milne-Smith of Davies Ward Phillips & Vineberg LLP, representing the CLC members on Wednesday. Given that money would be exchanged between Ontario and the other jurisdiction, the lotteries says Ontario would in practice be a participant in a single game both home and abroad, which is prohibited.
What does “in the province” really mean?
Another big consideration is the concept of location.
The Criminal Code stipulates that a provincial government can offer gambling “in that province.” The MCK, whose legal challenge of Ontario’s iGaming model was dismissed earlier this year, argued that international play would be illegal because it would not be physically located entirely in the province. Olthuis Kleer Townshend LLP lawyer Nick Kennedy told the court on behalf of the MCK on Thursday that debates like this should be happening in Parliament, not the appeals court.
Hera Evans, another counsel for the AG, posited that the international aspect would not be a violation because “there is no real and substantial connection” to another jurisdiction.
“It’s already an online gaming scheme,” she told the court. “What we’re proposing now is to integrate Ontario’s scheme with international schemes. In an online world, ‘in that province’ has to mean something different than a physical location.” These things raise their own questions, not least whether the soon-to-be-independent iGaming Ontario would be deemed to be “conducting and managing” Ontario’s scheme the way it does for the province’s regulated commercial iGaming and online sports betting.
Milne-Smith told the court that, when it comes to how Ontario would rule and safeguard a international play scheme, its approach has relied on a “just trust us” mindset.
“The evidence, unfortunately, is that iGaming Ontario and [the AGCO] have not earned that trust.”
Counsel for the CLC, Matthew Milne-Smith
His fellow CLC counsel, Chanakya Sethi, suggested that Ontario is “trying hard to run away” from the conduct-and-manage aspect of the question.
Familiar grey market arguments resurface
Milne-Smith noted that CLC members felt the need to intervene in the reference question partly because their status as their provinces’ only regulated (or “legal,” in the lotteries’ estimations) online gambling operators is threatened by the cross-province presence of commercial brands, some of which are regulated in Ontario, as well as those brands’ affiliates.
“These companies advertise across Canada and use their legal Ontario sites to push traffic to parallel, unauthorized sites in the rest of Canada,” argued Milne-Smith, who said the issue has exploded since the 2021 Criminal Code amendment that allowed for expanded iGaming in Ontario.
Ontario and the intervening gaming companies made it plain on several occasions that they do not feel the issue of affiliates or cross-provincial-border concerns are relevant to the legal question at hand. While Ontario is the province that raised this reference question, which the court acknowledged was a unique one, Goldenberg emphasized that if international play is determined to be legal, other provinces’ lotteries would be free to do their own thing to explore the avenue.
The province also leaned on the familiar argument in gaming legislative discussions that regulating play stifles the grey market.
“We believe it would better protect the people of Ontario.”
Counsel for the AG, Ananthan Sinnadurai
The province also leaned on the familiar argument in gaming legislative discussions that regulating play stifles the grey market. “This model would direct, we hope, Ontarians away from those sites…” said Ananthan Sinnadurai, a third counsel for the AG.
After the three days’ worth of arguments to and fro, Tulloch said the five-judge panel will make a decision at a later date. How long that will take is the next question of many.
