The Fully Legal Ontario iGaming market – Can Canada Challenge the US

This spring will unveil a new chapter in the global online gambling industry, after months of twists and turns encompassing all of the elements of an Ian Hamilton novel, with iGaming set to launch in Canada’s most notable province - Ontario.

Perhaps for many, this may not have too much of an effect - online gambling has been possible for over a number of years, however, online offshore with casino sites that had a license from the Malta Gaming Authority (MGA).

Following a significantly long process legislation was introduced and passed for the province in September last year, with iGaming Ontario (iGO), the subsidiary of the Alcohol and Gambling Commission of Ontario (AGCO) officially revealing a launch date of April 4.

Such a move means that any private iGaming operator that has a license approved by the AGCO, plus an operator agreement in place with the iGO can start offering their products and services to residents in the province.

iGO Executive Director, Martha Otton revealed the importance of this landmark announcement, especially from a player perspective: “Consumers can be assured that companies who successfully enter the new Ontario market will have met rigorous standards of game and operator integrity, fairness, player protections and social responsibility, allowing all players to play with confidence.

“Today, most internet gaming by Ontarians takes place on websites not conducted and managed by the province,” Otton added. “Our new internet gaming market will give consumers enhanced entertainment choice, support the growth of a new, legal market and generate revenue that can help fund programs and services that benefit all of us.”

Meanwhile, one of the entities that is predicted to be a major player in the province, Penn National Gaming via its brand, theScore Bet, was the first private operator to secure the Responsible Gambling Check iGaming Accreditation, courtesy of the Responsible Gaming Council (RGC), prior to the market opening.

It is a move that has been met with strong enthusiasm from Penn National Gaming President and Chief Executive, John Snowden and John Levy, who is Chief Executive of subsidiary, theScore.

Speaking in the immediate aftermath of the confirmation of the news, Snowden disclosed: “Launching theScore Bet in Ontario will mark an exciting expansion of our online gaming business into a major new market where we already have an established mobile sports media product in theScore app and a wide base of loyal users.

“Today’s news is very exciting, and I would like to recognize and congratulate the government of Ontario and the AGCO and iGaming Ontario for their dedication to creating a modern open and regulated sports betting and iGaming market.”

Meanwhile, Levy was also just as enthusiastic about the potential that the Ontario market has: “The AGCO and iGaming Ontario have been thoughtful and collaborative in their approach to creating and managing this new industry, and the result is a soon-to-be-launched framework that will bring widespread benefits to Ontarians and establish Ontario as one of the biggest and most important regulated gaming markets in North America.”

What Makes Ontario Such an Attractive Prospect for Online Gambling Firms?

Even prior to the approval of online gambling in the province, there were still a substantial amount of people who were signed up to iGaming sites that they could access offshore - for years, Canada has had a lot of potential to challenge as a major player.

With a population of nearly 15 million and a yearly average household income of just over $97,000, it is clear to see why the province is keen to capitalise on being able to offer online gambling to its residents and there has been no shortage of interest in terms of applications from operators.

Perhaps the biggest clue as to the potency of the Ontario market is the number of online gambling firms that have lined up to apply for licenses, including some of the biggest operators in the world.

UK powerhouse bet365 is one, in particular, that was quick on the uptake - arguably the most prominent standalone business in the UK industry, the company has expanded aggressively over the last 12 months especially, strategically identifying new markets based on the potential that they can offer.

Interestingly, there are a number of key US firms that have also been approved licenses, which suggests they are hedging their bets, however, when one moves, the others generally follow.

MGM Resorts International and Entain joint venture, BetMGM were one of the first from the US to have a license approved and over the last two years, the company has really started to make its mark, becoming most people’s number one choice of sportsbooks in a number of states - Michigan is a prime example.

FanDuel and DraftKings, two operators that undoubtedly have the lion’s share of the US online gambling and sports betting market, have also been approved licenses to operate in Ontario - another serious indicator that this could be a major market in the global industry.

Unbeknown to many, Ontario leads the way in Canada when it comes to innovation while being home to over 50 per cent of all employees in the high tech, financial services and other intensive knowledge-orientated industries.

With Ontario officially launching online gambling and sports betting, it has also paved the way for the emergence of new, Canadian brands in the industry, with a great opportunity for these to beat global competitors to a considerable share of the market.

Arguably the main advantage that they have, is an understanding of their own target customers and how the Canadian market behaves in terms of buying signal recognition and even how to market products and services in a way that convert effectively.

Taking into account the multi-industry expertise that Ontario has, this could essentially translate into a potential new niche that could help to service a sector that is growing exponentially.

The software niche of the online gambling industry plays a crucial part in the whole process, with gambling firms spending millions every year on technology from multiple software providers around the world. With Ontario boasting the requisite infrastructure, the foundations are certainly already laid for potential startups in the iGaming software niche and it could see local operators onboarding them as suppliers in an effort to boost the local economy.

How Can Ontario Reap the Benefits of Launching Online Gambling

When a country, state (in the case of the US), or province (in this case), launches online gambling, while there is initially a feeling of cautious optimism, lawmakers and legislature officials are often enticed by the potential tax revenue that can be generated from gambling companies.

Everywhere has differing tax levies - New York state, which launched mobile sports betting in January has a staggering 51 per cent tax rate while neighbouring New Jersey’s is set at 14.25 per cent.

For firms that operate in Ontario, they will be required to pay a 20 per cent tax rate and based on the level of interest, both from a foreign and local level, this represents a great opportunity for local government to make improvements to infrastructure.

This is one of the major benefits for countries that pass online gambling bills, though, often there is an intense wait to see how the news will be greeted and how popular this will be - if operators do not generate a lot of revenue, this is subsequently reflected in the amount of tax that is paid to the relevant governing body.

In addition, there is a great opportunity for Ontario to become a leader in one sector the online gambling industry, at least, if not globally, then certainly for Canada - it is expected that other provinces in the country will follow Ontario’s lead.

For local firms that are planning to launch, this will also lead to job creation on a whole other level. As, if expected, the online gambling industry has unprecedented growth levels, then operators will need a considerable amount of staff in different departments.

While the latest Labour Report (December 2021), indicated an unemployment rate of six per cent for Ontario (down substantially), it still translated to 491,900 people still being unemployed.

Many operators in the online gambling industry, often require skilled employees - especially in departments such as marketing/branding, trading, business intelligence, plus others. However, a lot of people who enter the industry with no experience, usually start at what is perceived as “at the bottom,” in customer service roles, and then often work their way up, through multiple departments.

Of course, some firms may require offices to be built if there are none available, which again, presents an opportunity to help revive the construction industry - ultimately, launching online gambling in Ontario could certainly help to boost employment.

Well-Positioned to Challenge the US

For the last year, most of the talk in the industry has been about the vast potential of the US online gambling market, especially with more and more states approving legislation and, interestingly, each one performing better than the previous. Month after month, wagering records are broken, in addition to revenue - other markets watch with interest.

One, in particular, is Canada. Across the country, most provinces allow residents to wager or place bets with local operators which attract a significant amount of interest, however, there are also many who visit sites offshore - legal due to them having a recognised license, courtesy of the MGA.

The way in which the online gambling industry is structured in Canada, is perhaps, one of the most convoluted in the world - even more so than the US, especially when you consider that each state from an offshore perspective has different licenses. Every province is limited to the type of online gambling that is allowed, with each province free to set its own laws.

What may happen from a nationwide basis, may determine what the response is from the market in Ontario, in terms of whether more provinces follow suit in the same fashion. Without a doubt, tax revenue will be the main motivator and this is likely to become apparent within the first 12 months. The fact that some of the major players (brands), in the industry have applied for licences perhaps lends a clue as to the potential that has been recognised.

Whether or not Canada can challenge the US in terms of revenue figures, could depend on a number of factors. While there have been many predictions about the potential size of the US market, much will depend on, to what extent this will come to fruition. In addition, some of this could rest on how many more states become regulated - California, the most populous state in the US, could certainly have its say here.

Looking at it from a realistic standpoint, it seems unlikely that the Canadian market can come close to challenging the US, however, it could certainly have a major influence on the industry as a whole, especially for certain operators, who may find Canada is a high performing market for them.

Merger and Acquisition Deals and Their Effect on the Canadian market

The last couple of years especially has seen the online gambling industry become a hotbed in the world of iGaming mergers and acquisitions, with numerous deals far exceeding $1 billion. Incidentally, ever since online gambling opened up in the US, most acquisitions have been initiated by US firms - Caesars Entertainment, especially being particularly active in an attempt to establish themselves in the world order.

Already, there has been a substantial amount of investment in the online gambling market in Canada - US media company, SBC recently agreeing to buy the Canadian Gaming Summit, effectively announcing to the industry that the confidence is substantially strong.

Private equity firm, Apollo Global Management, based in New York and who previously twice tried to buy UK operator William Hill, also have an influence on the market having acquired the Great Canadian Gaming Corporation. What will be interesting to see, is how much of an effect local operators have on the merger and acquisition scene. Of course, much will depend on factors such as how successful they are in branding themselves, in order to win new customers - certainly convincing them to sign up to their platforms instead of more established foreign operators.

As the global industry continues to grow at an unprecedented rate with more markets opening up around the world, the merger and acquisition scene will undoubtedly continue to expand in perpetuity - Canada could certainly play its part.