Auditor General still has concerns about Ontario’s iGaming Model

The 2023 annual report pertaining to Ontario’s Acting Auditor General, Nick Stavropoulos, was released at the beginning of last December. 

In this report, released as a follow-up to the one conducted back in 2021, the Auditor General expressed his lingering concerns regarding the current state of online gaming and sports betting in Ontario, Canada. 

In his report, the Auditor General referred to how, since the initial launch of regulated gambling in Ontario, the progress made in the iGaming market has been painfully slow.  

The progress that he is referring to here is in reference to the recommendations that were made with the aim of ultimately improving the state of the iGaming market in Ontario. These recommendations were suggested in the annual report released in 2021, the same year that marked the launch of regulated gambling in the province. 

In addition to this, the Auditor General remarked on the way in which the new gaming landscape that has emerged in Ontario in the last few years has brought with it a number of different complexities that are inherent to this environment.  

As we will explain further in this article, the recommendations suggested by the Auditor General back in 2021 have, for the most part, fallen on deaf ears. 

Ontario’s Auditor General 2021 Report 

In the annual report that was released back in 2021, the same year that marked the initial launch of the regulated online gaming and sports betting market in Ontario, the following concern was highlighted: 

The Auditor General had pointed out the ‘legal risk’ that was involved in opening up a competitive market for online gaming and sports betting practices. This comment was made in reference to the court challenges that were being launched over provinces who would ‘illegally’ delegate their role to private-sector firms: 

“This report highlights three key concerns: While certain details of Ontario’s Internet gaming initiative have yet to be finalized, there are indicators that a significant amount of decision-making power and business risk will rest with private operators. As a result, there is legal risk with respect to whether iGaming Ontario meets the ‘conduct and manage’ threshold set out in the Criminal Code.  

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

Typically, provinces in Canada are allowed, under federal law, to ‘conduct and manage’ gambling. This is usually accomplished through entities owned by the government. 

In Ontario, however, this is not the case. Instead, the government had first proposed, then implemented, an iGaming model that would permit private-sector operators to extend their services in the online gambling and sports betting industry by making contracts with a newly emerged agency: iGaming Ontario (iGO). 

This was, therefore, a new interpretation of the Criminal Code that no other province in Canada had ever implemented before. 

With regards to this, Ontario’s Acting Auditor General, Nick Stavropoulos, made the following statement: 

“The concept of whether a province had illegally delegated the ‘conduct and manage’ function to a private entity had been the subject of past legal challenges in Canada. Based on our review of publicly released literature available at the time of our original report, we noted Ontario’s model for Internet gaming passed on a significant amount of business risk and strategic decision-making power to private gaming operators.” 

Before the launch of the regulated iGaming market in Ontario in 2021, the Auditor General had recommended that the government of Ontario ought to ‘take appropriate steps’, thus ensuring that the iGaming market that they had planned and envisioned would comply with the federal Criminal Code. 

In addition to this, the ‘legal risks’ that the Auditor General had warned the Ontario government about back in the 2021 annual report may have already started to rear their heads: 

In November 2022, a lawsuit was launched on behalf of the Québec-based Mohawk Council of Kahnawá:ke, the aim of which was to suppress the iGaming market in Ontario. 

This lawsuit questions the iGaming framework established in Ontario, as well as its legality and constitutionality. In addition to this, this lawsuit alleges that, rather than the province conducting and managing online gaming, it is the private-sector operators who have taken on this role. 

The court hearing is set to take place in February of this year, however, with regards to the legal risks perceived in the iGO’s recent financial statements, the Auditor General noted the following in his 2023 follow-up report: 

“In our Independant Auditor’s Report for these financial statements, we included an ‘Emphasis of Matter’ paragraph to draw users’ attention to this significant legal matter.’ 

The 2023 Annual Report by the Auditor General  

In the annual report that was released in December of 2023, Nick Stavropoulos, Ontario’s Acting Auditor General, remarked on the following: 

“In 2022/23, iGaming Ontario launched the new regulated market for Internet gaming in Ontario. iGaming Ontario entered into operating agreements with 46 operators working as agents on behalf of iGaming Ontario and the Province. In this report, we provide an update on the developments in Internet gaming in Ontario. Our Office conducted an audit of iGaming Ontario’s 2022/23 financial statements where we issued an unqualified opinion.” 

In addition to this, the Auditor General started his report by referring to the way in which none of the 5 actions that were recommended in the annual report of 2021 were, thus far, implemented in full: 

“The Ministry of the Attorney General (Ministry), as of November 23, 2023, has not fully implemented any of the five actions we recommended in our 2021 Annual Report. The Ministry has made little progress in implementing two of the recommended actions relating to the fairness and integrity of Internet gambling (hereafter referred to in this report as “Internet gaming”).  

“Two other recommended actions relating to the governance structure of iGaming Ontario will not be implemented. Our recommendation pertaining to compliance with the Criminal Code of Canada, made prior to the launching of the new Internet gaming market is no longer applicable, since the new Internet gaming market was launched in April 2022. The status of actions taken on each of our recommendations is described in this report.” 

One of the most noteworthy lingering concerns that Ontario’s Auditor General has pointed out in the 2023 report is the following: 

“Our Office continues to hold the view that, as a regulator, the AGCO should not, in fact or in appearance, be in any way involved in the conduct and management of Internet gaming in Ontario. Instead, a structurally independent government organization (i.e., not a legal subsidiary of the AGCO) should manage the operational and revenue-generating responsibilities for Internet gaming provided through private gaming operators, and be separate and independent of its regulator.” 

Who is the Alcohol and Gambling Commission of Ontario (AGCO)? 

The Alcohol and Gaming Commission of Ontario (AGCO) is a provincial regulating agency that is responsible for a number of sectors within the province of Ontario. 

This corporation falls under the Alcohol and Gaming Commission of Ontario Act, 2019. 

The sectors that are under the jurisdiction of the AGCO include the following: 

• Lottery and Gambling 

• Cannabis retail stores 

• Alcohol 

• Horse Racing 

In accordance with this, the AGCO administers the following: 

• The Liquor License and Control Act, 2019 

• The Gaming Control Act, 1992 

• The Horse Racing License Act, 2015 

• The Cannabis License Act, 2018 

• The charity lottery licensing Order-in-Council 1413/08 

With the public’s interest as their primary focus, this provincial regulatory agency reports to the Ministry of the Attorney General (MAG). 

What is the iGO (iGaming Ontario) 

The iGO (iGaming Ontario) is a subsidiary of the Alcohol and Gambling Commission of Ontario (AGCO). 

The iGO is responsible for the managing and conduct of internet gaming in the province of Ontario: 

“iGaming Ontario (iGO) has worked with the Government of Ontario and the Alcohol and Gaming Commission of Ontario (AGCO) to establish a new online gaming market that helps protect consumers gambling through private gaming companies (Operators).” 

The iGO was established in July 2021, and has worked in collaboration with the AGCO and the Government of Ontario in order to bring the “the world’s best online gambling experiences to the province in a safer environment, helping to protect consumers and provide more choice.” 

In this way, only those gaming operators who have successfully registered their private gaming companies with the AGCO and have made an operating agreement with the iGO can provide their online games to the players of the province of Ontario, Canada. 

Regarding the operators that can offer online games in Ontario, the iGO went on to say the following: 

“Operators offer gaming sites in the market on behalf of the province in accordance with these agreements. Through these relationships, gaming revenues are shared with the Government of Ontario to be used in support of provincial priorities.” 

In addition to this, the iGO follows a specific vision, mission and values that we have quoted below: 

‘To Support the agency in successfully delivering its mandate, iGO has developed a vision, mission and value set to guide its operations.’ 

The Vision: ‘To lead the world’s best gaming market’. 

The Mission: ‘To conduct and manage Ontario’s safe, efficient, and legal world-class iGaming market’. 

The Values: 

• ‘We facilitate new and exciting entertainment choices for players.’ 

• ‘We promote responsible gaming, value diversity, equity and inclusion, and treat one another with respect.’ 

• ‘We enable innovation and speed to market by reducing red tape and leveraging private sector expertise.’ 

• ‘We create a culture of constant reflection and continuous improvement.’