Counsel for several government-owned lotteries from across Canada spent time on Wednesday trying to poke holes in the legality of Ontario’s plan to connect provincial poker players and daily fantasy sports contestants with opponents abroad.
Ontario believes that proposal is legal. In the telling of provincial lawyers on Tuesday, Ontario players would be under the umbrella of their local regulatory regime, but their rivals in the U.S., Europe, and elsewhere would be under the oversight of those jurisdictions.
In other words, the province says there might be one poker game or paid DFS contest under its proposed model, yet two or more regulatory schemes would be involved.
This is key to Ontario’s argument to the provincial Court of Appeal that the proposal is legal, as Canada's Criminal Code says a province can conduct gambling "in that province” and not in a foreign jurisdiction.
Not so fast, my friend
However, the Atlantic Lottery Corp., British Columbia Lottery Corp., Lotteries and Gaming Saskatchewan Corp., and Manitoba Liquor and Lotteries Corp. aim to break down Ontario’s legal wall and have the appeals court reject the province’s plan.
Davies Ward Phillips & Vineberg LLP lawyer Matthew Milne-Smith, appearing on behalf of those members of the Canadian Lottery Coalition (CLC) on Wednesday, invited the five-judge panel to “follow the money” that will flow through the peer-to-peer games that Ontario wants in the province.
To the lotteries, it's all connected.
“They are one game,” Milne-Smith said. “Somebody wins, somebody loses.”
Milne-Smith told the judges the “liquidity” Ontario wants from abroad is money, which will flow from Ontario players to foreign players and vice versa.
The exact structure of Ontario’s pooled liquidity model is a work in progress, as the province will rely on agreements and contracts negotiated with foreign regulators and operators that have yet to be struck. Nevertheless, the lotteries claim Ontario would be a participant at home and abroad, which is not permitted under Canadian law.
Milne-Smith used the example of “Diane in Kitchener” and “Dieter in Berlin” playing poker against each other in this model for Ontario sports betting and iGaming.
“If Diane's money is going to Dieter, Ontario is participating in both lottery schemes,” the lawyer told the Court of Appeal panel.
Day One of Ontario's DFS/poker/iGaming court reference filled in some blanks and set the stage for some serious rebuttal:https://t.co/ERUrZtJjgb @Covers
— Geoff Zochodne (@GeoffZochodne) November 27, 2024
Wednesday was the second day of arguments for the Ontario government’s reference to the provincial Court of Appeal regarding online gambling, DFS, poker, and pooled liquidity.
Ontario is asking the court for an opinion about the legality of allowing online bettors to play peer-to-peer games against gamblers outside Canada.
While DFS and poker are already legal in Ontario (which also has legal sports betting and iGaming), its regulations for online gambling require all players to be in the province.
This had the effect of wiping out paid daily fantasy contests and shrinking poker games in Ontario when a new regulatory model went live in April 2022.
Now, there are dozens of private-sector iGaming sites and operators available to Ontarians and regulated by local authorities, but smaller pools of poker players and no authorized options for DFS.
Ontario's court reference could change that status quo, as long as the Court of Appeal agrees with the province's belief that it can pair its players with international ones. If Ontario gets the green light from the court, it could help bring back paid DFS contests in the province and grow its poker scene.
The province also believes that adding international liquidity to its games may make them more attractive to bettors and get them to ditch unregulated sites for provincially regulated options, such as DraftKings, FanDuel, and GGPoker.
Quick question
However, the Ontario government was unsure enough about whether Canadian law permits this, which prompted the question to the Court of Appeal earlier this year.
What Ontario and its allies seem certain enough of now is that its proposal would be legal if it is deemed the province is responsible for its own “lottery scheme” – a term for gambling used in the federal Criminal Code – while a foreign jurisdiction is running another.
In this way, a single game would have multiple regulatory regimes involved but Ontario players would be governed by the province’s system. For example, a poker player would log on to a provincially regulated site and gain access to tables populated by opponents from Ontario and other countries.
“Our position is the game is two schemes interacting with each other,” said Josh Hunter, a lawyer for Ontario’s Ministry of the Attorney General, on Tuesday.
Ontario’s question to the court makes no mention of other provinces, as the Criminal Code states that those gambling ties can be formed only in partnership with other provincial governments.
Ontario has yet to strike an interprovincial liquidity agreement for DFS or poker, but, under recently passed legislation, its online gambling agency, iGaming Ontario, could eventually do so.
In the meantime, non-Ontario lotteries believe Ontario’s proposal is legally out of bounds and should be shot down by the Court of Appeal. Their reasons lie in their interpretation of the law and some unique concerns, such as their allegations of illegal conduct by affiliate companies of Ontario-regulated operators.
“If my friends want to do what they say they want to do, go get Parliament to amend the [Criminal] Code,” Milne-Smith said at one point.
Milne-Smith said the CLC members intervened in the court reference because they see themselves as the sole legal online gambling operators in their jurisdictions, but not the only online gambling operators.
The lotteries, he said, face competition from a flood of private iGaming companies, some of which have ties to Ontario-regulated entities, that compete with provincial lottery and gaming corporations for customers and revenue.
“These companies advertise across Canada and use their legal Ontario sites to push traffic to parallel, unauthorized sites in the rest of Canada,” he said.
A trust issue
The lotteries’ allegations about illegal gaming by affiliates of Ontario-regulated sites are connected to their concerns that the province’s proposal will lead to interprovincial gaming (or, as the lotteries claim, more interprovincial gaming) without authorization from other provincial governments.
Ontario maintains it will not allow customers from other Canadian provinces in DFS contests and poker games with global liquidity, at least not without the consent of those provinces. However, the lotteries see Ontario and its regulators as not doing much to stop the affiliates of Ontario-regulated entities from wooing customers outside the province.
The lotteries, for instance, see widespread advertising by online sports betting and internet casino gambling sites both in Ontario and other parts of Canada. Moreover, a consultant hired by the CLC found that Ontario-regulated sites accessed from outside the province prevented users from gambling but redirected them to international sites where they could.
“The evidence, unfortunately, is that iGaming Ontario and [the Alcohol and Gaming Commission of Ontario] have not earned that trust,” Milne-Smith said.
Chief Justice Michael Tulloch noted that the non-Ontario lotteries have sent cease-and-desist letters to operators but have yet to bring a lawsuit in Canada or abroad against the companies they claim are poaching business. Milne-Smith, though, suggested it would be pointless to pursue those claims abroad and noted the entities they are concerned with have no physical presence in Canada.
“We’re not pursuing these companies because it would be futile to pursue them in Canada,” he said.
Milne-Smith said the response from operators to the cease-and-desist letters was that the lottery coalition’s claims were defamatory. He also said the AGCO’s response to a letter from the lotteries was that it was none of their concern, as the regulator said Ontario’s rules do not cover games outside the province.
Answer the question
Ontario and its allies want the Court of Appeal to steer clear of the CLC’s allegations and stick to the question the province wants answered, which doesn’t touch on interprovincial gaming.
Henein Hutchison Robitaille LLP's Scott Hutchison, appearing on behalf of FanDuel and PokerStars-owner Flutter Entertainment PLC, said it could be “unfair” and "dangerous" for the court to discuss the legality of operators that may offer online gambling in other parts of Canada.
“No Canadian court has ever said that that business model is unlawful,” Hutchison told the judges on Wednesday.
Hutchison added that he was unaware of any Canadian court even being asked about the legality of those sites and said the lotteries could sue in their provinces rather than “hijacking” Ontario’s reference.
One concern operators have is that comments made by the judges in the court reference may influence litigation elsewhere. Even so, as was outlined in a decision by an appeals court judge regarding evidence in the reference, the matter cannot result in the judges finding operators criminally liable.
The hearing for Ontario’s court reference will continue on Thursday, the last scheduled day for arguments. A decision will follow at some point, most likely weeks or months later.
