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Ontario poker players may soon get to return to the international liquidity pool, but it’s not a done deal quite yet. Asked to clarify by the provincial government, the Ontario Court of Appeals offered — by a split 4-1 decision — the opinion that the proposed model isn’t inconsistent with federal law.
The rest of Canada remains a so-called “gray market” for international online gambling. Players in other provinces gamble on international sites with relative impunity because those sites are outside the reach of Canadian gambling law, which lacks an equivalent to the U.S. Unlawful Internet Gaming Enforcement Act.
Things changed for Ontario when it adopted its innovative semi-privatized iGaming plan. Under the Ontario model, private companies like BetMGM and DraftKings offer their products to residents on behalf of a government entity, iGaming Ontario (iGO), which fulfills the federally mandated obligation to “conduct and manage” any gambling in the province.
The Ontario model was a double-edged sword. Once the market opened, any operator still serving Ontarians in a gray-market capacity would become permanently ineligible for a license. That forced poker and daily fantasy sports operators to exclude Ontarians from their international sites, offering them only locally-operated sites with a ring-fenced player pool.
In the case of the daily fantasy sites, most stopped operating entirely, deeming their products unviable in such a limited player pool.
The Court opinion doesn’t restore international liquidity immediately. However, it means that Ontario is less likely to face a legal challenge as it amends its policies to allow liquidity-sharing.
Federal law explicitly allows shared lotteries by mutual agreement. Indeed, there is already a provincially-operated online poker site, OK Poker, that pools players in Quebec, British Columbia, and Manitoba. The ambiguous legal question is whether the same sort of deal is possible between a province and another country.
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A Proposal Without Precedent
Private operators joined the Alcohol and Gaming Commission of Ontario (AGCO) in arguing for the validity of such a model. On the other side of things, a coalition of other provincial lotteries and the Mohawk Council of Kahnawà:ke (MCK) argued against it.
Both sides offered precedents they felt supported their case. However, all five Appeals Court justices were in concurrence that neither precedent applied.
The proponents of allowing multi-jurisdictional gambling pointed to the “RSC” (real and substantial connection) tests established in a number of other Canadian legal cases. Under this view of things, something doesn’t have to take place entirely in a province to be associated with the province.
However, the Court found that the RSC concept was inapplicable to Ontario’s gaming model. Those tests are typically used in constitutional cases to determine whether a province is attempting to wield power unjustifiably outside its borders.
On the other side, the province’s opponents pointed to the 2002 case of the Earth Future Lottery. That was a charitable lottery operating under the blessings of the Prince Edward Island government, but attempting to sell tickets over the internet worldwide, including to customers in other provinces.
Even Justice Katherine von Rensburg, who wrote the dissenting opinion, agreed the Earth Future case was not applicable. For one thing, it concerned a charitable lottery, rather than a provincial one. More importantly, it involved unilaterally offering a product in other jurisdictions without their consent, as opposed to a mutually-agreeable deal to merge two products, each approved in its own jurisdiction.
The Majority Opinion: Parliament Meant to Empower Provinces
Four justices concurred that the Ontario model would remain legal with the proposed addition of multi-jurisdiction networks. Their logic was rooted in the “Modern Principle” of the Canadian judiciary, which requires wording to be interpreted in the context of the overall Act it appears in and the presumed intent of the legislators who drafted it.
Their conclusion was that the context of the overall federal gambling laws, “while not definitive, favours a broad interpretation” of what provinces are allowed to do.
Justices Tulloch, Gillese, Hourigan, and Dawe wrote that they believe Parliament’s intent was to relax federal gambling laws and empower provinces to decide for themselves whether and how to offer gambling to their residents. The current gambling laws were written against the backdrop of black markets flourishing under a blanket prohibition.
Through this lens, the restrictions on interprovicincial gambling except through a mutually managed lottery were intended to ensure no province would have gambling products forced upon it by others — and not so much to restrict a province’s options for selling its products. The omission of any mention of foreign countries would then amount to tacit permission. The majority opinion states:
Parliament’s linguistic competence implies that omissions are deliberate, if any express reference is expected.
In other words: if the lawmakers wanted to prohibit deals with foreign countries, they would have said so. The mention of other provinces is there to establish the need for consent when operating an interprovincial lottery, not to exclude other types of multijurisdictional scheme.
Dissent: Sale of Foreign Lotteries is Prohibited
Justice von Rensburg, on the other hand, believes Parliament’s intent was to maintain prohibition, with limited exceptions. She focuses on another clause, which prohibits the promotion or sale of foreign lotteries in Canada.
Canada’s gambling laws don’t actually use the word “gambling.” Rather, the term “lottery schemes” is used very broadly to cover everything that we could commonly understand as gambling.
Ontario has argued that a networked poker site or DFS product comprises multiple distinct games — one in each jurisdiction — that interact. By that logic, it can claim that its portion of the network is locally conducted and managed by the province as required by law.
However, Von Rensburg disputes that. She writes that the fact that players are virtually seated at a single table or entered into a single contest, playing by the same rules, indicates that they are participating in a single game. And because that game is partially conducted and managed by a foreign jurisdiction, it becomes a foreign “lottery,” prohibited by the letter of the law.
She goes on to explain that the same refutation applies even under Ontario’s interpretation. If the other jursidction’s site is considered a separate game, then the Ontario players are still being given access to a foreign lottery, which is prohibited.
Image Credit: Kevin P. Siu via Flickr (license)
