Ontario's Auditor General sees legal risks, potential conflict of interest in new online gambling framework

Ontario’s Auditor General Bonnie Lysyk released a 12-page report Wednesday, titled “Internet Gaming in Ontario”, which questions whether online gambling and sports betting “may be open to legal challenge under Canada’s Criminal Code”.

After examining the legality of Ontario’s proposed internet gaming model under the criminal code, the governance structure for internet gaming in the province, and the fairness and integrity of internet gaming in Ontario, Lysyk concluded all of these issues should be reviewed before the market is opened up to private operators. 

Lysyk stated in this document that a provincial government must have significant oversight and management of any gaming operation under Canadian law. “To fulfill the ‘conduct and manage’ requirement, a provincial government needs to be actively involved in the delivery of gaming activity”, she wrote.

Far from criticism, the report presents the chance to air the possible pitfalls of the current legislation to the public, which would allow regulators to adjust their plans. 

Currently, the provincially run Ontario Lottery and Gaming Corporation is the only legal provider of iGaming in the province, which also runs the only legal online sportsbook in the area, PROLINE +. 

The Ontario Government is using the Alcohol and Gaming Commission of Ontario (AGCO) and its subsidiary, the iGaming Ontario, to review applications for private-sector operators of online casinos and sportsbooks. 

Provinces currently allow gaming partners to make many of the decisions regarding casino and sports betting operations. But Ontario has yet to enter into such an agreement, and create its own sportsbook or iCasino enterprise. Sportsbooks like DraftKings, however, have expressed interest in working in the province. 

“Consideration for whether a province  has illegally delegated the ‘conduct and manage’ function in a gaming scheme to a private entity has been the subject of past legal challenges in Canada. We conclude that iGaming Ontario’s business model could be subject to legal challenges.”, the Auditor wrote. 

Lysyk also urged iGaming Ontario, which will oversee sports betting in the province, to take appropriate steps to ensure compliance with the Criminal Code prior to launching. 

Ontario expects to open the market with online casinos and sports betting apps in Q1, 2022. It is the only province to suggest that it will work with private sportsbooks like DraftKings. IGaming Ontario has yet to release a detailed plan for the regulation and operation of online casinos and sports betting apps. 

Lysyk says the province needs to ensure the integrity and fairness of games offered by private-sector operators.

“Under Ontario’s new model for internet gaming, key responsibilities to maintain integrity and fairness have been entrusted to the private sector such as direct testing of internet gaming systems, game design, gaming systems, determination of payouts, and odds-setting,” the Auditor General said.

The annual report also included responses by the Ministry of the Attorney General. There are existing policies for the Board of Directors on iGaming Ontario, which are currently being updated for the AGCO.

The ministry provided a rebuttal in the report, insisting the AGCO has already developed standards for the iGaming market that include integrity concerns. An independent lab will be testing and certifying all online games, and the AGCO has an iGaming Compliance Unit in place to “conduct intensive compliance oversight of registered iGaming operators and suppliers.”

A Customer Care and Dispute Resolution Policy is also being put in place by iGaming Ontario to monitor players and any concerns they might have regarding private operators.  

The government hopes to have all disclosures in place to keep the connection between the AGCO and iGaming Ontario.