IMGL Magazine July 2022

Ontario’s first ninety days

physical presence in the country and do not otherwise target the Canadian market directly through advertising), Canadian courts do not have jurisdiction over them. To date, the Canadian government has done little to prevent such grey market operators from accessing the Canadian market, given that the chances of a successful prosecution of such offshore operators without a real and substantial connection to Canada are likely to be limited. However, registering in Ontario changes the risk calculation for such operators. Operators registered in Ontario will need to enter into a commercial agreement with the Ontario government and take multiple other steps that will arguably have the effect of creating a ‘real and substantial’ connection between their activities and Canada. Thus, operators who register in Ontario and also continue to serve Canada’s other provinces, where no regulated markets exist, will find themselves substantially more vulnerable to prosecution. It is worth noting here again that the advent of the Ontario regulated market did nothing to change Canada’s federal prohibition on the provision of gaming services – the Ontario regulated market operates through an exception to this prohibition for regulated markets operated by provincial governments. The Alcohol and Gaming Commission of Ontario (AGCO) is one of the entities involved in overseeing Ontario’s regulated market. One of main regulations it has published to date, the Registrar’s Standards for Internet Gaming 2 , prohibits operators registered in Ontario from operating in other provinces where no regulated market exists further complicating the situation. Operators wishing to register in Ontario are thus left with a somewhat difficult choice. By exiting the grey market and registering in Ontario they gain some significant advantages, including the security of operating in a regulated setting. They also enjoy substantially more freedom to market their product offerings directly to Ontarians (and compete with other registered operators who are doing so). At the same time, if they also wish to continue to operate in the rest of Canada, they will find themselves facing a substantially higher risk of prosecution, and be offside of the Ontario regulator’s policies. For many operators, this is not a risk worth taking. Ontario not the only game in Canada Ontario may be Canada’s economic heartland, accounting for approximately 40 percent of the country’s population and GDP, but the market opportunity presented by the

rest of Canada is much more than an afterthought. Having to choose between exiting this market or facing the risks outlined above can be a difficult choice for many operators. Muddying the waters further is the fact that there has been a dearth of regulatory guidance on this issue. Currently, the main focus of Ontario regulators has been policing the activities of operators within Ontario. To the writer’s knowledge, to date Ontario regulators have not taken any action against any operators registered in Ontario who have continued to operate in the rest of Canada, nor have they taken a strong public stance on this issue. This is in contrast to AGCO’s actions pre the launch of the regime when they warned operators in the process of securing a licence to cease uregulated activities or risk their application failing. All businesses that applied for registration before the 4 April launch were required to cease operations in Ontario from the moment their registration was approved by AGCO. One aim of Ontario’s regulators has been to maximize adoption of the regulated market which could be jeopardized if operators were obliged to give up on the rest of the Canadian market. it would pose a significant disincentive to operators who are considering exiting the grey market and entering the regulated market meaning Ontario regulators have a clear incentive not to press this issue. However, it is always open to governments of the other Canadian provinces to take steps in this regard. For instance, if these governments begin to have concerns about Ontario-registered operators carrying on business in their jurisdictions, it is possible they could pressure Ontario regulators into taking steps to prevent it from occurring. The other Canadian provinces also have the option of prosecuting such operators directly, given that, as discussed above, the operators’ registration in Ontario significantly increases the chance that such a prosecution will be successful. So far, none of the other provinces have publicly indicated a willingness to take any of these steps. As time passes and the Ontario market matures, however, it is possible that this may change. How things will unfold in respect to this issue is an interesting question that many Canadian gaming lawyers will be following closely in the coming years. What can be said for the moment, however, is that it remains an area rife with uncertainty that continues to cause significant difficulty to operators who are, in effect, being forced to chose between operating in the grey market or accessing the Ontario regulated market.


IMGL Magazine • July 2022 • 35

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