With football on both sides of the border, MLB playoffs, and NHL training camps around the corner, Canadians will soon have a new way to enjoy their favourite sporting events – or discover new ones. Following much anticipation, Federal Justice Minister David Lametti announced that the Safe and Regulated Sports Betting Act will come into force on August 27, 2021. With the Act coming into force, Canadian provinces will be permitted to allow single sport and event betting, opening the door to what could be a greater than CA$14-billion market nationally. This insight provides an overview of the regulatory requirements applicable to internet gaming in Ontario and the proposed revisions to standards applicable to single event sport betting, including rules regarding who may offer betting services in Ontario, how such services may be marketed, and the employee training and ongoing compliance requirements applicable to regulated entities.

Under the previous betting regime applicable in Canada, Canadians were only permitted to place bets on a type of wager known as a parlay where bettors must correctly predict the outcome of two or more events. With single sport betting, Canadians will now be permitted to wager on the outcome of only one event. Notably, although Federal law has been amended to become permissive of single event betting, it is the provinces that are responsible for managing and regulating lottery systems. Accordingly, provinces will need to decide whether to legalize single sport and event betting in their provinces and, if so, how such activities will be regulated. The deadline for submitting comments on proposed revisions to applicable betting standards in Ontario is August 18, 2021.

Background

In Ontario, the Alcohol and Gaming Commission of Ontario (AGCO) is responsible for regulating sports betting and gaming within the province. Throughout 2021, the AGCO has also been exploring the expansion of its services to internet gaming (iGaming) through a subsidiary, iGaming Ontario, which has been working to advance the Ontario Government’s plan to create an open and competitive gaming market. iGaming Ontario is intended to “foster an exciting game experience that prioritizes customer choice, create a competitive marketplace to promote business grown and combat the unregulated market, ensure market integrity and safety; and provide Ontarians with robust consumer and responsible gambling protections.” Following engagement periods conducted in 2021, whereby the AGCO requested and collected feedback and input from stakeholders on the launching of regulated iGaming in Ontario, on July 15, 2021, the AGCO published “Registrar’s Standards for Internet Gaming” that are a set of standards to be upheld by iGaming Ontario, iGaming operators and gaming-related suppliers. The Registrar’s Standards are expected to come into force in late 2021.

Registrar’s Standards in Ontario

Under Ontario’s Gaming Control Act, 1992 and Regulation 78/12, the Registrar of the AGCO is authorized to establish standards to regulate Ontario’s gaming sector. Stakeholders, including iGaming Ontario, operators and gaming-related suppliers, are required to comply with the Ontario Act, associated regulations, and other requirements established by the Registrar, including the Registrar’s Standards. The Registrar’s Standards are divided into the following six categories, each which are discussed in greater detail below and are intended to, collectively, establish a robust and responsible gaming market in Ontario: (i) entity level regulations, (ii) responsible gaming, (iii) eligibility, (iv) ensuring game integrity and player awareness, (v) public safety and awareness, and (vi) minimizing unlawful activities related to gaming.

In contemplation of the enactment of the Act and the legalization of single sports and event betting in Ontario, the AGCO has published revisions to the Registrar’s Standards to contemplate single sports and event betting that, once approved and finalized, will be integrated and form part of the Registrar’s Standards.

Entity level regulations

The Registrar’s Standards include rules that regulate the type of entities that may offer betting services to Ontarians and the manner in which such entity’s and their employees operate and deal with customers and other third parties. Such entities are required to maintain a sound control environment and an organizational structure that promotes good governance, accountability and oversight, as well as transparency in dealing with the AGCO. Applicable regulations govern matters such as: (i) the governance of regulated entities (including their management and employees); (ii) control activities and record retention requirements for operators; (iii) relationships between regulated entities and third parties such as suppliers; and (iv) customer service standards.

Under the Registrar’s Standards, gaming operators and gaming-related suppliers will be subject to a number of requirements that significantly impact their operations and ability to hire, train, and manage employees. Specifically, regulated entities will be required to: (i) create and abide by a code of conduct that addresses conflicts of interest and transparency; and (ii) ensure employee compliance with the code. In addition, approval of at least two senior-level managers will be required to override any control activities and any such instance shall be required to be reported to the operator or supplier’s board of directors or similar governance structure. Gaming operators will further be required to establish, implement and maintain controls to support preparation of financial reports and employees involved in performing control activities must be trained and have knowledge of the organization’s control environment, the regulatory risks that the controls are designed to mitigate, and the regulatory objectives. Regulated entities should also be aware that any information, including records related to compliance with laws and the standards and adherence to the control activities, must be retained for a minimum of three years.

Responsible gambling

One of the primary areas of focus for the Registrar’s Standards is ensuring that iGaming is provided in a manner that minimizes potential harm and promotes a responsible gaming environment in Ontario. Accordingly, the Registrar’s Standards include minimum standards for regulated entities, including requirements to: (i) implement and follow policies to identify, prevent and minimize the risk of harm from gaming; (ii) adhere to certain marketing and advertising requirements and standards; (iii) enable players to make informed decisions and encourage safe play; (iv) monitor risk profiles and behaviours for players potentially experiencing harm; (v) train employees with respect to responsible gaming practices; and (vi) adhere to game designs and features standards.

All staff, including senior management, are required to be trained on the content and application of the policies and procedures at the time they are retained by the operators and such training programs should be reviewed and evaluated regularly for effectiveness to ensure that they follow industry best practices and that the stated objectives of the policies and procedures are achieved. Advertising, marketing materials and communications may not target high-risk, underage or self-excluded persons to participate in lottery schemes, shall not include underage individuals and may not knowingly be communicated or sent to high-risk players. In addition, gaming sessions must clearly display a customer’s net position in Canadian dollars.

Eligibility

In order to ensure certain individuals set out in the Ontario Act are restricted from participating in iGaming, the Registrar’s Standards include rules that provide: (i) that only eligible individuals are permitted to participate in iGaming; (ii) for the collection of certain personal information from players; (iii) for authentication and fit-for-play affirmations prior to iGaming; and (iv) requirements for de-activated or dormant accounts.

Under the Registrar’s Guidelines, only eligible individuals are permitted to create a player account, and only individuals who hold a valid player account are permitted to log on to their account to gamble. Operators must put in place mechanisms to detect and dynamically monitor the location of a player attempting to play a game and to block unverified attempt to player. Games on gaming sites may be provided only within Ontario, unless they are conducted in conjunction with the government of another province. In addition, regulated entities are required to collect and save relevant player information upon registration, including information required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Regulated entities must also make reasonable efforts to inform players of player funds remaining in dormant accounts.

Ensuring game integrity and player awareness

The Registrar’s Standards require iGaming to be conducted with honesty and integrity and that players have sufficient information to make informed decisions prior to playing. To that end, the Registrar’s Standards include detailed provisions relating to: (i) game integrity through independent verifications of transactions, collection and retention of records and the approval of games and remote game servers by the Registrar; (ii) collusion and cheating; (iii) instances of services interruptions of gaming systems; and (iv) adherence of games to specifications and randomly selected elements.

Any regulated gaming system must be capable of providing custom and on-demand reports to the player and the Registrar. Game specifications must be documented that clearly indicate the objective of the game, the wager that may be made, how the game is operated, odds of winning and the statistical advantage of the operator. Where there are suspected game or system faults that may impact game integrity or fairness, operators are required to make the game unavailable to players until the issue has been resolved. A player’s bet and the outcome of the game must be clearly displayed, easy to understand, and available for a sufficient length of time for the player to review. Players must be provided with clear information on the process to report activities related to collusion and cheating and such process must be simple to use and readily accessible to a player seeking to make a report.

Public safety and protection of assets

The Registrar’s Standards also contain provisions aimed at ensuring that assets, including gaming equipment and systems, are secure and that customer information and funds are safeguarded. These provisions regulate the information technology standards for regulated entities, security management for iGaming systems, the collection and governance of data collected through iGaming, and software development and practices.

Access to gaming information systems must be monitored and logged and traceable to a specific individual. Regulated entities are required to perform due diligence on all acquired gaming system technology to ensure security and processing integrity requirements are met. Any changes to a gaming system must be consistently and clearly documented, reviewed, tested and approved. Regulated entities are also required to implement data governance practices to address data processing integrity and protection of sensitive data.

Minimizing unlawful activities related to gaming

The final category of Registrar’s Standards focuses on reducing unlawful and criminal activities related to gaming in Ontario. These provisions require mechanisms and policies in place to identify and prevent unlawful activities. Mechanisms must be put in place to reasonably identify and prevent unlawful activities at any gaming site. In addition, anti-money laundering policies and procedures to support obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act are required to be implemented and enforced and operators are required to take reasonable measures to identify and prevent any suspected money laundering activities.

Conclusion

Following the announcement that single sport and event betting will be permissible under the Canadian Criminal Code, provinces, including Ontario, are in the process of finalizing betting regimes applicable within their respective borders. For more information or advice with respect to the legalization of single sport/event betting in Canada, the Registrar’s Guidelines in Ontario, or strategies for compliance with applicable gaming rules, contact Michael C. DeCosimo, Suraj Rammohan, or Ilan Levy.