Key Takeaways

  • A majority decision by Ontario’s Court of Appeal found that allowing local online gamblers to play peer-to-peer games with players outside Canada would remain lawful.
  • The decision may pave the way for a potential return of daily fantasy sports and larger poker games in Ontario, though implementation could take time due to possible appeals and regulatory agreements.
  • The ruling is a win for Ontario’s iGaming market, which has struggled with limited liquidity and the absence of major DFS operators since 2022.

Court Ruling on Ontario’s Proposed Model

On Wednesday, the Court of Appeal for Ontario issued a long-awaited opinion regarding the legality of letting Ontario-based online gamblers participate in peer-to-peer games with players located outside of Canada. A majority of appeals court judges that heard the reference (four out of five) concluded that online gaming and sports betting would remain lawful under the Proposed Model.

The model pitched by the Ontario government to the appeals court would allow provincial gamblers to wager with and against players in other countries, but not in other provinces, unless Ontario first reached an agreement with those other provinces.

In summary, the Proposed Model would permit players in Ontario to play peer-to-peer games against players who are physically situated outside Canada, and to bet on the outcomes. Examples of the peer-to-peer games that would be permitted include poker and daily fantasy sports wagering. The players located in Ontario and those in other countries would access these games through different web portals, with players in Ontario using Ontario-regulated sites, and players in other countries using websites or applications accessible in the jurisdictions where they are physically located.

This, the majority said, would be legal under Canada's Criminal Code.

Implementation Could Take Time

Wednesday's majority opinion could ultimately revive, rejuvenate, and expand paid DFS and online poker in Ontario. However, it could still take time before regulated daily fantasy contests and bigger poker games are launched in Canada's most populous province.

It's possible, and perhaps even very likely, the opinion is appealed to the Supreme Court of Canada. That one appeals court judge dissented is notable. The four-judge majority (which included Chief Justice Michael Tulloch) also noted its opinion is based on several assumptions, such as that players outside of Ontario but within Canada will not be allowed to participate unless an interprovincial agreement is in place.

Furthermore, the province will still have to strike acceptable agreements with other jurisdictions or operators to share iGaming-related liquidity. Meanwhile, Ontario-based operators will need to figure out how to offer games that comply with those arrangements.

Many practical details about how the Proposed Model would operate remain undetermined. The Attorney General of Ontario has explained that Ontario will enter into agreements with international operators, foreign state gaming regulators, or foreign jurisdictions. However, it is unclear who in the government of Ontario will choose the jurisdictions or entities with which Ontario would enter into agreements and who would negotiate these agreements.

Still, a win's a win. And Wednesday looks like a win for anyone who wants paid DFS back in Ontario.

Industry Reaction

The Canadian Gaming Association called Wednesday's majority opinion a significant victory for Ontario, bringing back a valuable option for consumers who enjoy pooled gaming activities such as poker and Daily Fantasy Sports.

The association said it looks forward to collaborating with both the Province of Ontario and the Alcohol and Gaming Commission of Ontario as they begin implementing these changes.

The CGA, an intervenor in the court reference, also noted that while there are 30 days for an appeal of the decision to be launched, it believes that the strength of the verdict will encourage a measured response.

Ontario's government referred the question to the appeals court regarding shared liquidity back in February 2024. A hearing was held last November that allowed the province and several other interested parties to make their case about how the appeals court should answer the following question: Would legal online gaming and sports betting remain lawful under the Criminal Code if its users were permitted to participate in games and betting involving individuals outside of Canada as described in the attached Schedule, and if not, to what extent?

Why it took nearly a year for the court to issue its thoughts about the reference could be due to a few factors. One may be the novel nature of the reference, as no other court in Canada has tried to answer such a question, as well as a Manitoba court's ruling in May against offshore sportsbook Bodog.

A footnote to Wednesday's decision said that the Canadian Lottery Coalition, a group of non-Ontario lotteries that intervened in the court reference, wrote to the court to draw the panel's attention to the Bodog case.

Ontario’s DFS Drought and Closed Liquidity

Nevertheless, in Ontario's view, sharing iGaming liquidity with U.S. states or other countries would be legal, as provincial players would remain under local regulation and their foreign counterparts would be overseen by their jurisdictions. There could be, the province suggested, two or more different regulatory schemes involved in one game.

The agreements between Ontario and its foreign partners would set the rules for such a game, addressing things like how old someone would have to be to play. In some ways, what the province was asking permission for is similar to what's been done with poker in the U.S., where several states share liquidity for games.

The province also believed sharing iGaming liquidity with foreign jurisdictions would help the legal Ontario sports betting and iGaming market. That market is home to more than 80 private-sector sites offering sports betting, casino games, and bingo, but its requirement that all players be physically located in Ontario killed daily fantasy sports contests and limited the size of poker games.

Case in point: DraftKings and FanDuel shuttered their DFS businesses in Ontario before launching in the province's new, regulated iGaming market in April 2022.

While the two operators still offer online sports betting and internet casino games in Ontario, they do not offer DFS, which is partly because the contests they could offer would be much smaller than they'd like. Ontario also treats pay-to-play fantasy contests as gambling, and so operators would be subject to the province's iGaming rules and revenue-sharing requirements.

Other big names in DFS, such as PrizePicks and Underdog, have steered clear of Ontario. iGaming Ontario, the government agency through which private-sector operators can do business in the province, said in an affidavit that Ontario's closed liquidity model has discouraged some operators from seeking to offer games and sports betting in the province through iGaming Ontario.

Targeting the Grey Market

So, while it's estimated the lion's share of online gambling in Ontario now takes place on provincially regulated platforms, approximately 20% of that activity may not. Some of that lost market share may even be due to players using DFS or poker platforms outside the provincially regulated system; providing for bigger poker games and for a way for major DFS operators to return to the province could help channel more play onto Ontario-regulated sites.

The majority opinion noted that the advent of the internet has made it very difficult to prevent people in Canada from accessing offshore gaming sites, which are unregulated by Canadian authorities and do not generate revenue that the provincial governments can use to provide public services. Allowing Ontario to regulate players within its borders who wish to play online games against players outside Canada advances public safety by bringing such gaming under protective regulation, thereby reducing such risks as fraud and addiction. As well, it furthers provincial choice by enabling Ontario to address the social and economic impacts of online gaming, while preserving revenue and providing accountability to voters.

The majority said they rejected a restrictive interpretation of a Criminal Code section allowing provinces to conduct and manage gambling, or lottery schemes, within their borders. Doing so, the opinion said, would undermine Parliament's purpose in enacting that provision.

As the legislative history demonstrates, Parliament favoured provincial regulation because unregulated gaming that lacks provincial safeguards is harmful to society, increasing the risks of crime, fraud, and addiction. The majority accepted the Attorney General of Ontario's contention that leaving extraterritorial online gaming unregulated in Ontario would foster those harms.

Opposition from Other Provinces

With all that said, not everyone in Canada believes Ontario should be able to connect its online gamblers with rivals outside the country. Most notably, several government-owned lottery and gaming corporations, the Canadian Lottery Coalition, pushed back on Ontario's plans.

The objections of the non-Ontario lotteries were on legal grounds and because of concerns about Ontario-regulated iGaming operators allegedly advertising and trying to acquire customers in other provinces.

The Canadian Lottery Coalition said in a statement that it is encouraged that the Court of Appeal recognized that players in its jurisdictions cannot be permitted to participate in games or betting unless an agreement is in place with its provinces.

The coalition added that the Court's decision is explicit that these international affiliates must stop taking bets from Canadians outside of Ontario should they choose to proceed with this proposed scheme, further confirming that the coalition's respective sites are the only legal operators in its provinces. The group said its members will continue to review the Court's ruling and that it had no further comment at this time.

Dissenting View on Criminal Code Limits

One of the five judges hearing the Ontario iGaming reference saw things at least somewhat how the lotteries did, and dissented.

As Justice Katherine van Rensburg saw it, Ontario's proposed model anticipates a way of gambling that would fall outside of what's permitted by the Criminal Code. Ontario, she wrote, would be conducting and managing games outside its territorial limits.

Whether the Proposed Model is conceived of as one lottery scheme or two, or more, Ontario's actions in relation to the proposed agreements, the anticipated games and the overall lottery framework, would take it outside the protection provided in section 207(1)(a) of the Criminal Code because they would not occur entirely in that province, van Rensburg wrote.

In her view, regardless of whether, for the purpose of this reference, the Proposed Model is conceived of as one lottery scheme or as two, or more, lottery schemes, with the lottery scheme conducted and managed in Ontario linking with an international scheme, or schemes, Ontario would be taking actions in relation to the international elements of the Proposed Model that would not fall within the exemption for provincially operated lottery schemes provided for in section 207(1)(a) and would contravene provisions of the Criminal Code.

This is a breaking news story and may be updated as further developments occur.