North of the border: How Ontario became the model for the rest of Canada

Sandwiched between Hudson Bay to the north and the Great Lakes to the south, Ontario, home to more than 14.5 million people, hit the headlines on April 4, 2022, when its multi-licensed, commercial market went live. 

Fast forward more than two years, the province now hosts 50 operators running 80 sites, quite the contrast to the previous monopoly model under the Ontario Lottery and Gaming Corporation. Those operators, many of which found success during Ontario’s grey-market past, reported total wagers of C$63bn during the second full year of operations in the market. 

Dominated by online casino, total revenue came in at C$2.4bn on the back of 1.3 million player accounts, as of Q4 2023. Total wagers surged 78% while revenue leapt 72% on the first year’s figures, respectively.

Plans to develop a province-wide self-exclusion scheme and a ban on sports stars and celebrities in advertising, as well as restrictions on promoting bonuses, have seemingly not hindered progress in the market.

Economically, a Deloitte report has claimed the sector contributed C$2.7bn in GDP in year two, while almost 15,000 full-time equivalent jobs had been created. So, not bad going.

The market is managed by iGaming Ontario (iGO), a division established by the Alcohol and Gaming Commission of Ontario (AGCO) to oversee the sector. Speaking to EGR North America, iGO executive director Martha Otton says: “Overall, the opening two years of the Ontario market have been exciting, and we’re pleased with the overall growth, reception by consumers, commitment from operators, and benefits for the province.”  

Road to regulation

The process to introduce an open license model to Canada’s most-populous province started in April 2019, with Ontario’s then-Conservative government looking to bring an end to the monopoly. The two intervening years saw numerous stakeholders involved, none more so than Paul Burns, president and CEO of the Canadian Gaming Association. 

From his view, the “dialogue was constructive all the time” as the trade body chief embarked on an educational drive to inform political leaders and others in government of the various facets of what a white market would look like. 

Looking back, Burns says: “We started on the right foot. Everybody started with the right attitude. We the first ones to do it. We won’t be the last ones to do it. There’s a lot we can learn from those who’ve gone before, and they did, and I think we found a strong regulatory regime.”

Burns also singles out iGO, the AGCO, and Attorney General Doug Downey for their efforts in bringing the model to life before recognizing that the process hasn’t yet reached its conclusion.

He continues: “They don’t want to rest on their laurels either. They want to know that if there’s things we can do to improve and enhance this, we will. There are some things that they will look to address, but it’s minor in nature because the fundamentals are strong.”

Those fundamentals have also been borne out of the strong grey-market legacy Ontario had before April 2022, ensuring that the public were au fait with the sector and able to engage from an informed perspective from the off. So much so, that the latest iGO figures put the channelisation rate at 86%.

Reinforcing those fundamentals, the province was also successful in May after the Ontario Superior Court ruled the market’s model was consistent with the Criminal Code amid a challenge from the Mohawk Council of Kahnawà:ke. 

The challenge from the First Nation claimed operators were serving “backdoor private contractors” given the Criminal Code allows only some forms of gambling to solely be controlled by provincial governments.

Boots on the ground

According to estimates from boutique analyst firm Eilers & Krejcik Gaming (EKG), BetMGM is the market leader in Ontario, with iGO not breaking down market share by operator. EKG pegs the Entain and MGM Resorts International joint venture’s share at about 20%, while Ontario Lottery and Gaming, PENN Entertainment’s theScore brand, and bet365 are other big players in the space. 

The likes of BET99 and Betway also hold strong positions thanks to their grey-market legacies. A 20% GGR tax rate, in line with averages in North America considering recent agitations in the US to increase taxes, is also a positive.

One operator that has made waves since its launch in February 2023 is slots- and female-focused Betty. Led by CEO Justin Park, the firm has already carved out a 2% share of the market, with the boss revealing that the business has been “growing month over month quite nicely.”

Securing eight figures’ worth of funding via three capital raises since launch has also supported the group. Betty deploys an in-house tech stack, dubbed ‘Midnight’, to deliver hyper-personalized experiences for its users, something Park points to as a core tenet of the group’s success.

He says: “I would say focus is the headline. We built a proprietary platform and Ontario is the only market it serves. We are optimizing everything for that market, from player preferences to the nuances of iGO. We are diving deep into making our product very local. You’ll start to see our advertisements actually target specific parts of Ontario.” 

That slots focus comes as province-wide online casino wagers hit C$51.7bn in year two, well ahead of sports betting handle of C$9.7bn. Burns says this is once again a “reflection that the grey market was really strong.”

Park describes sports betting as “not a great business,” with efforts of his staff homed in on the online casino vertical. The New York-based firm has a hub in downtown Toronto where more than 10 staff across consumer-facing roles are based as part of Betty’s “super hyper-local approach.”

Another operator heading down the casino-only road is Rhino Entertainment with its Casino Days brand. Having only been established in 2020, the firm has made inroads across the globe despite its short lifespan.

The group previously operated in the grey market before Ontario shifted, but had to bide its time before rejoining the regulated fray. Despite the market going live in April 2022, Casino Days didn’t receive its license until the following January, meaning a game of catch-up was afoot. 

Reflecting on about 18 months in the regulated space, Rhino Entertainment CEO Ross Parkhill recalls: “Needing to close definitely wasn’t good for business. I know a few other operators in the same boat, and I think we’d all say the same. It was not the plan when we first started the licensing process, but these things happen.

“Thankfully, we’re back past the pre-regulated size. We had a lot of good players who liked our product who went elsewhere when it regulated, but we’ve had to deal with it.”

The aim now, given the group’s commitment to online casino and eschewing sports betting, is to crack the top five for market share in the vertical. Parkhill notes: “There’s still a long way to go until we get to the size where I’ll be really happy. But at least now, these past few months, we started seeing some really nice traction.”

While both firms have pointed to strong starts since going live, a tale as old as time is a testy relationship between operators and regulators. One only has to look to the UK for the tense engagement some actors in the market have with the regulator there, while increased regulation across Europe has frustrated those on the B2C side. 

But for Park and Parkhill, Ontario could not be further from that environment. With Betty still a relative newcomer in a stacked field, its CEO describes iGO as “quite good” and notes the collaborative nature of the regulator. “When we got to market, we would have weekly calls with someone at iGO, just helping us go live and then once we were live there’s continued support,” Park adds.

Parkhill, given Rhino Entertainment’s previous grey-market presence, is equally positive regarding iGO’s role in the transition. And given the business is spread across multiple jurisdictions in Europe and the Nordics, the CEO is no stranger to untangling the requirements of a regulated market, but he highlights iGO for making the process “much more manageable as an operator.”

He continues: “I quite liked the way they managed the process. I thought it was well thought through. They have this control matrix a Bible, a list of things you had to address. There was a very clear guideline to work off as well. 

“When you’re doing a regulated market, all different departments have to come together to cover the various areas, so we had a work-to list which I thought was very sensible and definitely helped us out.”

The next frontier

So, while Ontario is heralded as a success story, eyes have naturally turned to the next province that could become a multi-licensed market. There remains an extensive grey market in the other provinces, with crypto giant Stake dominating the space with at least 20% market share, as per EKG estimates. 

The frontrunner for regulation is Alberta (pictured), with stakeholders there eyeing the launch of a fully regulated space. The Albertan government has sanctioned a C$1m fund to review the viability of the market. As it stands, PlayAlberta, the government-owned platform, is the only licensed operator in the province. 

Otton says that Ontario is willing and able to act as a guiding light in these efforts. She reveals: “We want Ontario’s regulated, competitive igaming market to be a world leader and example for others, both domestically and internationally. As Canada’s igaming landscape continues to evolve, we are open to having conversations with our colleagues in other provinces.” 

Alberta Minister of Service Dale Nally reaffirmed these comments at the Canadian Gaming Summit in June when he said he would follow the Ontario model as the province had “built the roadmap” for an open market.

With Alberta roughly a third of the size of Ontario in terms of population, the market would be a smaller pond in which to fish for operators, but Burns still describes the province as a “good, strong gaming market” even in its grey state. The trade body chief also points to the political and economic nature of Alberta as a potential boon. 

He notes: “Alberta is a very business-oriented jurisdiction. They don’t believe in big government. They have a spirit of government supporting business. They also have lower tax rates and higher disposable income within the province. I think they’re moving very quickly and have a strong interest in getting something done sooner rather than later.” 

At the end of May, the Alberta legislature passed a bill giving the provincial government the authority to conduct and manage gaming, ensuring that Alberta Gaming, Liquor, and Cannabis is no longer the sole regulator. 

On the operator front, Park and Parkhill both point to their separate commitments of delivering localized products as being core to any prospective expansion. Rhino Entertainment’s chief points to the need for “tweaks” should other provinces shift to a white-market model. “I would be very happy if more provinces regulate,” Parkhill notes.

However, on Alberta, Regulus Partners has suggested “opening up a market to competition is far more complicated for a small market than a large one,” in relation to excess marketing and tax returns following Nally’s insistence on using its countrymate as a guide.

The analysts have put the province’s grey market at about C$350m and suggested Alberta “might want to engineer a market which channels its existing grey market but does not seek to unleash significant growth.”

The concerns over that rapid growth, which Regulus said saw Ontario grow five years in size in just 24 months, would see land-based cannibalization and an overstimulation of the market from a marketing and compliance management perspective.

The team added: “If Alberta wishes to ensure its online licensees have the organic scale to deliver investment into regulatory compliance, it will almost certainly need to find a mechanism for restricting licensing access.”

Aside from Alberta, British Columbia and Quebec are the other provinces drawing some attention as to a potential shift. Arguably the more interesting of the two would be the latter, with more than 90% of the population French speakers, and therefore a different approach needed to engage with local players as opposed to methods across the rest of the Great White North. 

Geolocation supplier GeoComply has penned a partnership with the operator-led Quebec Online Gaming Coalition, which includes DraftKings, Entain, and Flutter as members, to support the drafting of a new framework.

Alas, a speedy transition doesn’t appear to be on the horizon. The Quebec finance ministry said it wasn’t prepared to remove the monopoly model, in which Loto-Québec serves as the sole operator, in favor of an Ontario-style landscape earlier this year. 

However, optimism remains abound. Otton points to the regulated space as being of an ultimate benefit for consumers.

She says: “Leading an open and competitive market that Ontarians want to participate in is the single biggest thing iGaming Ontario can do to reduce the unregulated market and shift players into the regulated one.”

That is the market Burns thinks will act as the catalyst for the remainder of the country. He concludes: “We have a commitment to protecting players and putting in the highest level of consumer protection. And that’s what’s driving Ontario, that’s what’s driving other provinces.

“They want to extend and ­enhance the regulatory regime. Now it’s just to figure out how to do it.”