In January 2015, Ontario joined several other Canadian provinces in offering government-regulated online gambling entertainment with the intent to turn its newly launched PlayOLG site a safer and more controlled alternative to private operators that were, and continue to be, positioned in the grey market. The Internet-based platform was expected to contribute to the local economy, as all gaming proceeds from it were designed to provide funding to the province, to municipalities and local communities.
Looking at the latest revenue report by the Ontario Lottery and Gaming Corporation, however, it becomes clear that the Crown agency’s online division is generating modest revenues and still lagging behind its competition. While it reported revenue of $58 million in the 2016/2017 fiscal year, the gambling sites operated by Quebec and British Columbia earned considerably more. Privately owned online casinos and sportsbooks may represent even greater competition, despite the fact that they are not entirely legal in Canada. The somehow ambiguous legislation makes the situation quite complicated – private companies are not allowed to offer Internet gambling services. At the same time, thousands of Canadians, including gamblers based in Ontario, play casino games and bet on sports events on websites owned and operated by offshore companies.
With the enormous growth in the online gaming sector worldwide in recent years, the market in Canada is unsurprisingly following the trend with increasing participation and revenues. But the biggest question is whether it is attractive enough to draw players from offshore platforms where, should things go wrong, no protection is provided by Canadian law. Nevertheless, the Canadian economy profits from the local iGaming industry, which will most probably continue to grow and show results that are even more positive. In the case of Ontario’s PlayOLG, however, this growth seems to be happening at a slower rate than initial projections.
Lack of Centralized Regulation
Looking at the Internet gambling sector in Ontario, we need to mention several facts regarding the legal framework that the industry is based on. According to the Criminal Code of Canada, hosting a gambling site on Canadian territory is illegal, but the government has taken a decentralized approach, allowing individual provinces to determine what is legal and what is not. Another interesting detail is that only the provincial governments can operate gambling facilities, including online platforms.
As a result, the so-called Crown Corporations owned by provincial governments are responsible for lotteries, tribal and commercial casinos, and slot machines at horse-racing tracks. There is one exception, though, and this is the Kahnawake Mohawk Nation, while the Kahnawake Gaming Commission has the right to issue licences and regulate gambling providers, including foreign-owned operators with gaming servers based in the Mohawk Territory of Kahnawake in Quebec. This may seem like a paradox but it is the current state of affairs and no action has been taken against this exception of the law.
In Ontario, the Crown Corporation that operates and is responsible for all gambling products is the Ontario Lottery and Gaming Corporation (OLG). All casino gaming, as well as OLG’s gambling website, PlayOLG, are regulated by the Alcohol and Gaming Commission of Ontario. All other online casinos and sports betting sites offering services to Canadian residents are left, as it was explained above, in a somewhat gray area. Although it is not illegal for customers to play there, the government cannot provide them with any protection whatsoever.
High Expectations for PlayOLG
Ontario’s provincially regulated gambling site was expected to go online in 2012, but it launched in January 2015, offering players gaming entertainment with a focus on safety and responsible gambling. Only adults who are physically located in Ontario can use the PlayOLG website. At launch, it offered several types of games – slots, table games, video poker and lotteries (OLG’s Lotto Max, Lotto 6/49 and ENCORE). GTECH, known today as International Game Technology or IGT, was chosen as the primary software provider. Other products such as online poker, bingo and sports wagering were supposed to be added later. They are a still unavailable, however.
According to data by the OLG provided in a news release before the launch of the website, roughly 500,000 Ontario-based customers visited offshore grey market gambling sites not regulated in the province. They spent an estimated $400 to $500 million annually on these out-of-province iGaming platforms. One of the purposes of the new website was to attract some of these customers and to take at least a portion of these revenues and give them to the province. According to the initial projections, during its first five years in operation, PlayOLG was expected to deliver $375 million in additional profits to the Province of Ontario. Clearly, the expectations for the gambling site were quite high and there was a lot of enthusiasm around OLG’s new line of business that joined lottery, charitable gaming, resort casinos, and slots facilities. It is interesting to see the current performance of the website and to compare it with the iGaming industries of other provinces across Canada.
PlayOLG’s Revenues Are Rising, Still behind Its Rivals
In order to stay up-to-date and meet the increasing demand for online gambling products, provincial lottery corporations in British Columbia, Ontario and Quebec have begun to expand their services into the online realm. In 2004, the lottery website PlayNow launched and the British Columbia Lottery Corporation led the way, making it the first province-run Internet casino in Canada in July 2010. Loto Quebec followed suit in December 2010 with its online casino platform Espacejeux. In December 2014, Ontario’s PlayOLG was available for customer-focused preview and a month later, it was already online and running for all players to register and play for real money.
PlayOLG recorded an 18.7% increase in revenue from $49.2 million in its first year of operation but it then managed to attract more players and increase its earnings. According to OLG’s latest Annual Report for the fiscal 2016/2017 year, the website generated revenue of $58.4 million, an increase of around $9.2 million. The period in question, April 2016 to March 31, 2017, was the second full year of operation for the online casino. It is important to note that newer statistics would shed more light on the current performance of the site, but they would not be released soon, as the latest report was issued by OLG at the end of February, this year.
While the figures seem promising, they still represent an insignificant share of the total gambling revenue of OLG for that period, which was $7.47 billion. Lotteries generated the most (nearly $3.7 billion), while casinos earned more than $3.58 billion and the revenue from charitable gaming was $158 million. Let us also take a look at the revenue posted by PlayOLG’s rivals, PlayNow and Espacejeux. Quebec’s online operations generated $66 million in revenues in the first nine months of the 2016/2017 fiscal year. This is an increase of 42.1% when compared to numbers from the same period in 2015/2016. The comparison with the government-regulated gambling site in British Columbia is even more striking, as PlayNow managed to end the fiscal year with earnings of $125 million.
Interestingly, both Quebec and British Columbia have considerably smaller populations than Ontario. There are only 4.63 million people living in British Columbia while the population of Quebec is around 8.2 million. Ontario, on the other hand, is home to Canada’s capital Ottawa and the nation’s most populous city, Toronto. In fact, Ontario accounts for nearly 40 per cent of the entire population of Canada or approximately 13.4 million people. This means that the province has a much greater revenue potential that should be explored.