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Addressing one of the key legal issues for online gambling in Canada, the Ontario Superior Court has ruled that the province’s competitive model for iGaming does not violate restrictions on regulated gambling established by the Canadian Criminal Code.

In a  published on Monday (May 13), Superior Court of Justice judge Lisa Brownstone agreed that the first-of-its-kind regulatory model launched by iGaming Ontario (iGO) in April 2022 does not contradict the Criminal Code’s requirements for provincial governments to “conduct and manage” casino gaming and other commercial gambling activities within their jurisdictions.

The ruling addresses a legal challenge filed later in 2022 by the Mohawk Council of Kahnawake, the First Nation located near Montreal that also issues licences for online gambling operators serving Canadian and international markets.�� 

Justice Brownstone agreed that the Mohawk Council did have sufficient legal standing to file the case.

However, she ruled against the council’s claims that iGO violates the “conduct and manage” requirement of Section 207(1)(a) of the Criminal Code on the basis that operators own their platforms, procure their own suppliers and retain the majority of the revenue they generate, among other arguments.

The Ontario government established iGO in 2021 as an independent subsidiary of the province’s gambling regulator, the Alcohol Gaming Commission of Ontario (AGCO), to contract with registered commercial operators to offer casino games and sports wagering to Ontarians on its behalf. Previously, the government-owned Ontario Lottery and Gaming Corporation was the only entity authorised to offer online gambling within the province.

The judge noted that Ontario’s private operators are restricted to offering only iGO-approved games and require pre-approval in the use of player data, with iGO also in charge of dispute resolution and all policies related to responsible gambling, game integrity and player awareness.��

“The controls are detailed and extensive. They show that iGO retains ultimate decision-making authority on a breadth of issues central to the igaming scheme,” Justice Brownstone wrote.��

“It retains a high degree of control over the operators in a wide array of the igaming scheme’s aspects. These are markers of who is in control of the igaming scheme, and who is its operating mind. That operating mind is iGO.”

As of Monday evening, it was not clear whether the Mohawk council would seek to appeal the ruling before Ontario’s highest court, the Court of Appeal.

Had the Superior Court judge ruled in favour of the Mohawk’s legal challenge, it would have imperiled a regulated online gambling market that has already become one of the largest in the world and is now served by nearly 50 registered operators.

In a statement welcoming Monday’s ruling, iGaming Ontario executive director Martha Otton said the provincial agency had “always been confident in our model”.

“Ontario’s model meets the requirements and contributes to the public good by protecting players, their data and their funds, while helping to fund priority public services in Ontario, and bringing well-paid, high-tech jobs and economic development to Ontario,” Otton added.��

International Liquidity Also In Focus

The legal challenge brought by the Mohawk Council of Kahnawake is not the only major legal issue hanging over Ontario’s regulated market.

Amid persistent lobbying by the Canadian Gaming Association (CGA) and other industry groups, the Ontario government in February approved a so-called order in council to formally ask the Court of Appeal of Ontario to separately consider whether the Criminal Code permits provinces to enable gambling activities in which local residents may compete against players in international jurisdictions.

The AGCO has to date not allowed for international liquidity under the province’s regulatory regime.

As a result, leading fantasy sports and poker operators such as Flutter and DraftKings have withdrawn peer-to-peer products from the Ontario market, even as they have launched regulated online casino and sports-betting offerings in the province.

The lack of international liquidity for poker games is a material reason why iGO’s own studies indicate that around 14 percent of online gambling in the province continues to take place with offshore sites, according to Canadian industry executives speaking at last week’s SBC Summit North America in New Jersey.

Prior to 2022, Ontario “had a very strong poker market, daily fantasy business, a lot of other things that had to [go] away”, said Paul Burns, CEO and president of the CGA, which has filed for intervenor status in the case being brought before the Ontario Court of Appeal.

“The government is requesting the Ontario Court of Appeal to give them some advice and direction that international liquidity would be permitted under the Criminal Code of Canada, and that's a step that would definitely go to bringing back the poker market,” said Burns.

Whether Ontario will be able to continue to grow its channelization rate from the illegal market depends largely “on the outcome of that question” of liquidity, agreed Bruce Caughill, managing director of Rush Street Interactive in Canada and former general counsel of the AGCO.

“That remaining piece to channel was a big piece that was impacted by the decision not to include international liquidity on launch, so we expect to see that later this year,” Caughill told SBC Summit delegates.

The Court of Appeal is currently scheduled to hear the petition of the Ontario Attorney General on November 26-28 of this year, according to the .��

Aside from the CGA, other parties seeking intervenor status in the case include PokerStars-owner Flutter, as well as GGPoker-operator NSUS Group.

The Attorney General of British Columbia plus provincial lottery corporations from British Columbia, Saskatchewan, Manitoba and Atlantic Canadian provinces are also seeking to intervene in order to provide evidence in opposition to international liquidity for Ontario-registered operators, according to recent court filings.

Additional reporting by Matt Carey.