Online gambling firms bet on door opening to private sector
Proponents say expansion would generate new tax revenue for cash-strapped Ontario
Ontario’s online gaming industry is anticipating the provincial government will move ahead soon with regulatory changes to allow private operators into the market.
The province’s budget on Nov. 5 is expected for focus on the COVID-19 response, but operators hope online gambling will be at least referenced, and high on the priority list soon after.
The Canadian Gaming Association says an expansion of online gambling would generate new revenue for the government at a time when spending and deficits are soaring because of the pandemic.
It would also fulfil a pledge Premier Doug Ford made in last year’s provincial budget to “establish a competitive market for online legal gambling.” The province allows only online gambling run by
government-owned Ontario Lottery and Gaming Corp.
Last year, the province’s finance department estimated that most of the $500 million Ontario residents spend on online gambling flows to grey market websites.
“There’s a tremendous benefit to bringing this out of the shadows and into the forefront and take advantage of this regulatory change that will protect consumers and bring revenue to the government,” said Paul Burns, chief executive officer of the Canadian Gaming Association.
“It will also be a very strong economic driver to the industry to get companies to locate and operate here.”
Finance officials declined to give specific timing for regulatory changes.
“Over the coming months, the government will work to develop a new model for online legal gambling to help foster an exciting gambling experience,” said spokesperson Scott Blodgett. “Financial details will be determined once further work has been undertaken.”
Legalized online gambling in Ontario would generate about $547 million in annual revenue after five years, said James Kilsby, a Washington-based analyst at Vixio GamblingCompliance, a company that provides regulatory intelligence to the gambling industry.
How much that adds to Ontario’s coffers depends on the tax rate that’s applied. Most European countries tax online gambling at 15 per cent to 25 per cent of gross revenue, he said. Ontario is expected to set a “reasonable” rate compared to global peers, according to Danielle Bush, a partner at Miller Thomson LLP in Toronto and the corporate secretary of the Canadian Gaming Association.
“About 18 per cent to 20 per cent is what’s floating around within the industry,” she said. That would work out to $100 million to $110 million in tax revenue for a province that’s projected to have a $38 billion deficit this year.
In the longer term, there’s also potential to cash in on singleevent sports betting, currently prohibited under Canadian criminal law. If that type of gambling were legalized, tax revenue would swell to $1.47 billion for Ontario, Kilsby said.
In the U.S., iGaming and online sports betting generated nearly $160 million in tax revenue in 2019, according to the American Gaming Association.
Kilsby expects about 30 to 40 U.S. states — including Michigan, New York and most states that border Canada — will have full legal sports betting within five years. Ontario, which has a population larger than all but four U.S. states, “would be another landmark opportunity in North America” if Canada were to liberalize sports betting, he said.
The question is whether governments in Canada want to brave the criticism they may face for opening the door to more gambling.
On one hand, the virus has sharply limited entertainment options, creating the potential for higher-than-normal demand.
On the other, politicians may face heat for fuelling a rise in gambling losses or addictions in the midst of a crisis.
There is already evidence that online gambling results in higher rates of problem gambling, said Nigel Turner, an independent scientist with the Institute for Mental Health Policy Research at Canada’s Centre for Addiction & Mental Health.
“Anytime you make gambling more easily available, you run the potential risk of having more people gambling money they can’t afford to lose,” Turner said.