Report: Ontario set to lose C$2.8bn in revenue from igaming legalisation

The Canadian province of Ontario could lose as much as C$2.8bn in taxation revenue over the next five years following igaming legalisation, a new report has claimed.

The report, prepared for local land-based operator Great Canadian Gaming and obtained by local broadcaster CBC, suggests that online gambling expansion in the province will severely impact established land-based operators through lost revenues to the igaming sector.

Financially the report claims Ontario authorities could lose as much as C$550m annually, rising to C$2.8bn over the next five years, due to the lost revenue, and vicariously the lower tax receipts generated from these operators.

In the pre-pandemic environment, Ontarian authorities received an estimated C$2.5bn from the land-based sector. In the post pandemic environment, these casinos have been forced to close for extended periods, only reopening at diminished capacity levels.

Travel restrictions at the border also meant casinos in such cities as Niagara Falls and Windsor were starved of their US customers. At present, Ontario’s casinos are closed following restrictions occurring as part of Canada’s response to the Omicron variant of Covid-19.

Ontario’s fledgling regulated igaming market is still effectively under construction, with the province triggering a licensing process in August 2021. However, authorities have since encountered delays in getting the market up and running, with reports recently suggesting the market may not launch until February.

Prospective Ontario igaming operators are set to be charged an annual taxation rate of 20% on all igaming sites operated in the province, far lower than the 55% net proceeds tax levied against their land-based counterparts.

The report draws parallels with igaming expansion in the UK market post 2005, suggesting that players will flock to online operators over their land-based counterparts.

It claims the Ontario governments proposed open licence model will spur a tripling of online gambling operators share in the provinces overall gambling market.

“If an open-licence e-gaming model is implemented in Ontario, e-casino would capture a significant share of the total casino market,” the report claimed.

The consequences for the land-based sector, the report suggests, could see casino workforces decreasing by as much as 25%, or a loss of 2,500 jobs in the sector.

Addressing the report’s findings, Great Canadian Gaming CEO Tony Rodio said, in comments reported by CBC: “The report includes critical learnings from other jurisdictions that introduced iGaming and cannibalized land-based operators in the process.

“While we support igaming in principle, the Ontario government needs to take the time to get this right,” Rodio added.

Despite the damning consequences of igaming legalisation cited in the report prospective igaming operators have suggested that Canadians will not immediately all transition to online gambling following the market’s launch.

“When the regulated market opens in Ontario, nothing is going to change in respect to players’ entertainment habits,” DraftKings SVP Jeffrey Hass said:

“People who are playing in online casinos and online sportsbooks and online poker rooms will continue to do so, except they’re going to go from playing offshore to onshore.

“And anybody who continues to walk into real casinos in order to play games there will continue to do so,” Haas added.

Current Ontario government estimates suggest that as much as C$1bn is spent by Ontarians on illegal online gambling sites operating offshore, money which can effectively transition into local government coffers through the creation of the legal market.

Ontario government representatives have restated their confidence in the online gambling regulatory process, suggesting the two markets can benefit each other and consumers.

Addressing these gains, Ontario Ministry of Finance spokesman Scott Blodgett said: “The government intends to establish a competitive market for online legal gambling that will reflect consumer choice while minimizing the risks to consumers who play on these websites.

“The new igaming market is being developed to exist in parallel with land-based gaming activities in Ontario’s regulated market, and not detract from [Ontario Lottery and Gaming’s] revenue generation,” Blodgett added.