The future of Canada’s biggest provincial market for online sports betting could be decided by the interpretation of a three-word phrase.
That phrase ¨D “conduct and manage” ¨D is at the heart of a legal challenge that was announced in November 2022 by the Quebec-based Mohawk Council of Kahnawà:ke (MCK), an Indigenous government organization with longstanding ties to the online gaming industry.
A hearing on the MCK’s application was held this week in the Ontario Superior Court of Justice in Toronto before Justice Lisa Brownstone, who reserved her decision for a later date.
The MCK is asking the court to declare that private-sector operators are the ones running ¨D or conducting and managing ¨D the games offered in Ontario's competitive online gambling market and not the province via iGaming Ontario (iGO), a government agency.
Potentially big for sports bettors: The Mohawk Council of Kahnawà:ke says it intends to challenge the legality of Ontario's reading of the Criminal Code's gambling provisions in court.
— Geoff Zochodne (@GeoffZochodne) November 29, 2022
Ontario used that reading to launch a new iGaming market in April.https://t.co/VriEAkUXg6 pic.twitter.com/koebmhqPz5
If true, that could conflict with the federal Criminal Code, which is why the council is also asking the court to invalidate the legislation and regulations underpinning the iGaming market.
On the other side, the Ontario government, iGO, and their lawyers maintain it is the province that is conducting and managing iGaming legally.
There was extensive evidence presented by both sides during the hearing. That said, a decision in favor of the MCK could deal a blow to the Ontario sports betting market, which includes dozens of sites (such as Ontario-focused versions of bet365, DraftKings, and FanDuel) and hundreds of thousands of users.
“If Ontario is conducting and managing the iGaming regime, it is legal; if Ontario is not exercising those functions, it is not,” iGO’s factum to the court said.
A lot at stake
With the addition of private-sector operators and the inclusion of its provincial lottery and gaming corporation, Ontario has become one of the biggest online gambling markets in North America.
Billions have been wagered across its sports betting, casino, and poker sites since the launch of the province’s regulatory framework in April 2022, and that wagering is made possible by the province’s view of what “conduct and manage” allows, which the MCK does not share.
“No provincial government has ever done this,” said Nick Kennedy, an associate at Olthuis Kleer Townshend LLP and lawyer for the MCK, at one point during the hearing on Tuesday.
And that, the MCK and its lawyers argue, is because what Ontario is doing allegedly goes beyond the limits of what is allowed under Canada’s Criminal Code. It is the code that states provinces can “conduct and manage” various “lottery schemes,” which include the casino games and sports betting enjoyed across the country.
There is, however, no definition of “conduct and manage” in the Criminal Code. The MCK’s factum to the court also stated that “[n]o case has considered what is required for the conduct and management of a gambling website.”
How, then, is anyone supposed to know what "conduct and manage" should mean?
Be reasonable
The MCK said by "any reasonable interpretation" of conduct and management, it's left in Ontario to the operators, who own the websites, pick the games they offer, collect money from players, advertise, and keep around 80% of the revenue.
However, iGO says it conducts and manages the iGaming system on behalf of the province by contracting with operators who then become agents of the agency, which then controls what games can be allowed, owns the revenue, and sets and enforces a variety of rules.
Under their contract, iGO has “complete, almost dictatorial, authority” over the operators, said Ananthan Sinnadurai, a lawyer for the Attorney General’s office.
“Everything points to the dominant position occupied by iGO in that relationship," said Scott Hutchison, a partner at Henein Hutchison Robitaille LLP, on behalf of iGO.
A history lesson
Still, to help with their arguments, both sides looked to the past. There was plenty of discussion of previous court cases as well as debate in Parliament during this week’s hearing.
The MCK's historical arguments go back the furthest, as the council's factum said the Mohawks of Kahnawà:ke (a community near Montreal) have "engaged in gaming and sports betting since time immemorial," including by regulating and operating online wagering operations. Notably, the MCK established a gaming commission and owns a company that operates Sports Interaction outside of Ontario.
“They have an uncommon level of expertise in the operation and regulation of gaming having done both from their reserve for years,” Kennedy told the court, adding that the MCK are “not mere busybodies.”
The council's factum said the “genesis” of the conduct-and-manage model stems from the federal government’s overhaul of the Criminal Code in 1969. But these changes, the MCK argues, were just to open the door “a crack” to commercial gambling, which it maintains was still the case after subsequent tweaks, including the decriminalization of single-game wagering in 2021.
“Government conducted and managed lotteries — ‘state lotteries’ — were Parliament’s grudging concession,” the MCK factum stated. “Parliament was not contemplating anything like the iGaming Scheme in 1969 (or even 1985 or 2021).”
Plot twist
But… what if it was? That is what the province and its legal counsel argued.
In the province’s opinion, the “conduct and manage” passage of the Criminal Code should be regarded as giving Ontario a lot of leeway, and the 1969 reforms were the federal government stepping back to let the provinces take charge.
“It’s a move from what were in effect pre-Confederation prohibitions to a modern approach to permit gaming,” Hutchison said.
Another of the lawyers for Ontario suggested the history of the legislation means it should be interpreted “as broadly as possible” and, if there are different interpretations, the court should prefer the one preserving the peace between the province and the federal government.
The AG’s office added in its factum that the absence of detail should be seen as a deliberate move by federal lawmakers.
“It is a reflection of Parliament’s choice to promote cooperative federalism by acknowledging that the provinces have broad autonomy to make their own choices in the establishment and operation of their lottery schemes,” the document said.
A conspicuous absence
The federal government is noticeably absent from the case, which the two sides argue can be read in different ways. Maybe it means Ottawa doesn’t want to defend the iGaming scheme, or it could mean Ottawa agrees with the scheme (or takes no issue with it).
However, the lack of commentary was used by the province as an argument why the judge should reject the MCK’s requests.
“As the Supreme Court has observed on numerous occasions, ‘the Court should be particularly cautious about invalidating a provincial law when the federal government does not contest its validity,’” the AG’s factum said.
There's also the possibility that the judge never gets to the point of grappling with the "conduct and manage" question because she accepts some of the other arguments made by the province.
The Attorney General of Ontario's office contended that the MCK does not have a "genuine interest at stake" in the matter, but, rather, some considerable economic interests connected to the case. The AGO also warned the court could interfere with "prosecutorial independence," saying the MCK is, in effect, asking the court to allege operators are breaking the law, but that it is prosecutors, not courts, who decide whether to make such determinations.
Where is my 'mind'?
Nevertheless, the MCK noted that the “few decisions interpreting what is required for conduct and management” said it means someone is the “operating mind” of the gambling operation.
One case cited by the council involved the Supreme Court of British Columbia finding the province’s lottery corporation and not a casino company was the operating mind behind slot machines at a casino.
“This was because BCLC (among other things) owned and controlled the machines; selected the games and payouts; and performed technical support,” the MCK factum states.
The council’s factum argued it is the operators who are those operating minds, and that the policies iGO forces operators to subscribe to “are built around the fiction that iGO is the one offering games to the public (through operators’ websites).”
Meanwhile, iGO, says “all decisions of significance” are under its ultimate control — “iGO is, and always has been, the operating mind of the regime.”
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