Market Focus: Canada

Canada is divided into 10 provinces and three separate territories, each with its own provincial government, legal systems and municipal authorities. Legislation is drafted and approved at both national level and at provincial level, though one cannot affect the other. Historically, most gambling was illegal in Canada, but this changed in the 1970s when many illegal gambling methods were legalised.

The central legal framework overseeing the gambling industry is the federal Criminal Code of Canada, which applies to both land-based and egaming. The code makes it unlawful to participate in gambling except under certain circumstances.

However, one exemption to the code, first enacted in 1985, allows Canada’s provincial government, either alone or in partnership with other provincial governments to conduct and manage gambling that would otherwise be illegal under the code. Because of this, provincial governments across the country have enacted their own regulatory frameworks for gambling, giving rise to regulators in all 13 Canadian provinces/territories.

Definitions

The term gambling is not defined in Canadian legislation, but its widely perceived by authorities to mean the playing of “games of chance for money or taking a chance for a return much beyond the original investment”. Betting is defined as “a bet that is placed on any contingency or event that is to take place in or out of Canada, and includes a bet that is placed on any contingency relating to a horse race, fight, match or sporting event that is to take place in or out of Canada”.

In addition to defining bets, the code also explicitly defines a game as “game of chance or mixed chance and skill”. Existing Canadian case law implies that a game is classified as gambling if it involves a chance of gain or loss.

Under the code, there is no distinction between land-based and egaming and no provisions on the code address this issue explicitly. However, the language in several sections of the criminal code (for example, the definitions of lottery schemes) gives provinces licence to conduct or manage gambling offered “on or through a computer”.

The legal terminology of a lottery scheme makes it illegal to bet on the outcome of a single sporting event or contest, leaving gambling related to sporting events or contests limited to multiple-event (or parlay) betting. Casino games including poker, are not defined in the code. Historically, poker has widely understood to be a lottery scheme of mixed chance and skill. As a result, most of the provincial regulators have explicit rules which allow poker to be included on the list of permitted games.

Recent amendments to the code permit not-for-profit businesses to offer select types of egaming including lottery and raffles under provincial licences. As a result, most egaming has fallen into this category. Canadian law presumes that the code does not apply outside of Canada, because of this there is uncertainty on the status of international operators targeting Canadian citizens. It is an issue which has occupied several court cases in the past and has yet to be fully decided.

Regulation

Since the amendment of the code in 1985, provincial governments have operated almost exclusively as both operators and regulators of gambling activity, except in pari-mutuel betting on horseracing, where they share jurisdiction with federal authorities. Each province has enacted legislation and licensing, but with common themes, which include consumer protection and sporting integrity, preventing illegal gambling, financial investigation and surveillance of licensed entities and full oversight of all gambling being offered in each province.

Would the presence of a centralised regulatory body, independent of the provinces make the market clearer? Navtej Sandhawalia, principal at NS Advisory, offers this insight: “A centralised regulator would provide an opportunity for significant efficiencies and also greater liquidity for games such as peer-to-peer poker. However, the current construct has been in place for many years and I believe it would be very difficult to change course now.”

No licensing regime exists for egaming; however, provincial authorities have interpreted the “conduct and manage” rule as being able to offer egaming to patrons within their own jurisdictions. As part of this process, provinces have created statutory agents or business entities to carry out the activities of conduct and management. These agencies are often crown corporations, entities which are created as separate businesses but working under gaming control legislation. Each corporation is given almost exclusive rights to conduct and manage lottery, casino and egaming services within a jurisdiction.

While this motive is noble, in enabling the province to conduct gambling on a tight leash, there is no guarantee that provincial authorities or indeed the individuals running the business will make it a success, despite the exclusivity. This, coupled with the absence of any overriding federal legislation, means that the provinces operate as virtually independent fiefdoms, where every aspect of gambling is carried out by the province in one form or another.

So, what’s the best way to jump-start Canada’s market? Sandhawalia believes that the simplest solution is licensing and taxation: “Similar to the European model, Canada [and each Province] need to consider a licence and tax model in which many operators have a chance to offer their games to customers. This approach would enhance the regulated entertainment options available to customers and create an expanded marketplace for experienced operators. Currently, only a handful of egaming operators have active business within Canada [at least on the regulated side] and I believe Canadian customers are missing out on a wide array of exciting options.”

Population: 36.95 million

Internet Penetration: 90%

GDP per capita: $42,157.93

President: Justin Trudeau

Principal regulatory body: Individual states [/box]

Many of the provincial authorities, unprepared for running a large-scale casino and egaming businesses, have had to take on external partners to provide and administer gambling activities. However, the lack of federal regulation often leads many gaming firms to classify Canada as a ‘grey market’ and shy away from engaging with provincial regulators. In addition to this, many operators in Europe and the UK are hamstrung by a requirement to operate in a commensurate regulatory environment with consistent standards in each jurisdiction.

No federal law exists prohibiting gambling advertising; providing the underlying gambling activity complies with the code, advertising is permitted. All gambling advertising must be compliant with the federal Competition Act, which prohibits false and misleading advertising. Several provinces, including British Columbia and Ontario, have enacted standards aimed at enforcing a social responsibility agenda in gambling-related advertising, but this is not consistent across all provinces.

Over the years, there have been several challenges to the existing status quo. In September 2016, members the Canadian government, working with several lottery providers attempted to introduce legislation permitting single-game sports wagering by provincial lotteries. This legislation was later defeated in parliament following opposition from Canada’s ruling Liberal Party, despite claims that it would bring in revenue and stop unlicensed betting.

In a system where the provinces hold the regulatory power, but the federal government bars the door, pushing through reform will always be difficult, as Sandhawalia explains: “Some provinces have been pushing to modernise egaming within the confines of the current federal Criminal Code, however, have been unsuccessful. I think the provinces jointly need to work with the federal government to develop laws which better align with the realities of today’s marketplace.”

Thawing out or freezing over?

Canada is undoubtedly a market of great potential, with a high internet penetration and, given its proximity to the US, it’s surprising that many operators haven’t chosen to make the journey north. But with an environment which does not include centralised legislation and a consistent regulatory approach to both land-based and egaming, it is easy to see why none have chosen to do so. Until political mood shifts and appetites for gambling move beyond the provinces, the Canadian market remains frozen in a cold, grey environment.