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Ontario’s Regulatory Framework For Sports Betting Is Incredible

James Murphy
by in Gaming Industry on
  • Ontario will launch their regulated and competitive iGaming market on April 4.
  • The Alcohol and Gaming Commission of Ontario (AGCO) is the oversight body for sports betting in the province.
  • Ontario’s sports betting market should be one of the most competitive–and most lucrative–ecosystems found anywhere in the world.

We’re ridiculously excited about the launch of Ontario’s regulated–and highly competitive–igaming market on April 4. Ontario is poised to become among the biggest sports betting jurisdictions in the world and a lot of that has to do with the regulatory framework they’ve created. Throw in some favorable demographics–Ontario has a population that would make it the fifth largest state in the US–and it looks to be an absolutely great situation for the provincial governments, players and businesses.

I’m not sure if Ontario set out to create the best regulatory environment in North America but that’s what they’ve done. None of the anti-competition nonsense seen in so many states–online betting companies that complete the licensing process can operate in Ontario. No arbitrary limits on the number of licenses and, even better, no requirement that online gaming companies must partner with some type of legacy gaming business or financially/politically juiced in entity. Licensing fees are extremely reasonable–$100,000 per site.

The tax rate is 20% which would be in the top tier of US state tax rates but in context the picture is dramatically different. Virtually every US market has some type of ‘tethering’ requirement whereby an online sportsbook must partner with an existing business, usually a land based casino. The sportsbook and casino work out a deal that gives the legacy gaming business a cut of the revenue for doing nothing (or next to it). Typically, that ‘cut’ is around 10% or 15%. Those of you who are good at math see where this is going. In Ontario, the tax rate is 20% but the ‘cut’ that sportsbooks have to pay to legacy casinos or other politically ‘juiced in entity’ is zero percent:

20% – 10% = 10%
20% – 15% = 5%

That means the effective tax rate in Ontario since sportsbooks don’t have to give the governor’s pet industry a ‘taste’ is 10% (assuming a 10% revenue share) or 5% (assuming a 15% revenue share). At 10%, the tax rate is extremely reasonable and at 5% would be the lowest in North America (a full 1.5% less than Iowa and Nevada’s 6.5% tax rate). Most sportsbook executives I’ve spoken with would much rather pay a higher tax rate in exchange for not having a pointless ‘tethering’ requirement. Ontario also has a reasonable set of guidelines for betting events–none of this ‘no betting on in-state teams’ here. Here’s the rundown from the AGCO website:

  1. The outcome of the event being bet on can be documented and verified;
  2. The outcome of the event being bet on can be generated by a reliable and independent process;
  3. The outcome of the event being bet on is not affected by any bet placed;
  4. The majority of participants in the event or league are 18 years of age or older; event shall be broadly defined as assessing total participants in the event/league, rather than in a particular heat, game, match or final contest in the overall sporting event;
  5. For sporting events being bet on, the event must be effectively supervised by a sport governing body which must, at minimum, prescribe final rules and enforces codes of conduct that include prohibitions on betting by insiders (not applicable to novelty bets);
  6. There are integrity safeguards in place which are sufficient to mitigate the risk of match-fixing, cheat-at-play, and other illicit activity that might influence the outcome of bet upon events;
  7. The bet is not on a past event for which the outcome is publicly known;
  8. The bet is not reasonably objectionable;
  9. The event being bet on does not involve animal fighting or cruelty;
  10. Bets on assets and financial markets (e.g., stocks, bonds, currencies, real property) are prohibited;
  11. Bets which expose players to losses greater than the amount wagered are prohibited;
  12. Bets which mimic the structure of financial instruments, products, or markets are prohibited;
  13. Bets on synthetic lottery products and bets on lottery outcomes are prohibited;
  14. The event being bet on is conducted in conformity with all applicable laws;
  15. Bets on minor league sports in Canada, including the Canadian Hockey League (CHL), are prohibited.

Notice the bit I’ve highlighted–it looks like novelty betting is allowed assuming that the other stipulations are met (eg: no past posting). No financial betting, Canadian minor league hockey betting, lottery betting or betting on dogfights and cockfights strikes me as perfectly reasonable. Here’s the Ontario definition for sports and event betting:

Any bet on occurrences related to sports, competitions, matches, and other types of activities which meet the criteria articulated in Standard 4.34, and which excludes games or events where the outcome is determined or controlled by a random number generator, peer-to-peer play, or an operator. Sport and event betting includes: • Bets on fantasy sports, esports, and novelty events, but does not include bets on virtual sports.

• Sport and Event Bets include, but are not limited to, single-game bets, teaser bets, parlays, over-under, moneyline, pools, exchange betting, in-game betting, proposition bets, and straight bets.

and for Novelty Events:

Any bet placed on a non-sporting event where real-world factual occurrences are the contingency on which an outcome is determined and in accordance with Standard 4.34.

Standard 4.34 is that long list numbered 1 through 15 posted above.

We’ll have more on Ontario’s soon to launch sports betting market in the weeks to come!

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