Changes to Gambling Legislation: Who Will be the Big Winners?

February 17, 2021 |
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Canada’s gambling industry has undergone some major ups and downs over the last couple of decades – consistently growing up until the 2008 recession, when pretty much everyone had to think twice about where to spend their money. Since then, though, the sector has picked up, and gambling statistics from the CGA show further growth such that it’s now a major force in entertainment, right across the country.

Data shows that a whopping 60% of Canadians like to gamble. And the impact of COVID has meant significant growth for online gambling – for obvious reasons.

So, the positive state of the gambling industry – and the online gambling industry in particular – looks set to continue. News came last year of two important changes in legislation for Ontario – at Provincial and at Federal level – so it’s a good moment to look at the proposed changes and see who are likely to be the big winners.

Gambling Statistics in Canada – a Big Player in the Economy

According to data from the Canadian Gaming Association (CDA), gaming is a major contributor to the country’s economy, generating more than $15 billion in 2019.

In fact, it forms the biggest segment of the entertainment sector, providing close to 150,000 jobs and contributing $9 billion to government coffers.

Red chip with an arrowGrowth in the online gambling industry is evident in an estimated revenue of $31 billion for 2020 – but much of this currently goes offshore. And, with the economic impact of COVID, there’s never been a time when Canada needs to generate – and retain – more revenue, keeping it within the country, and boosting the home economy. So, now seems to be the time when, after years of trying – the two proposed changes to gambling legislation each have a chance of passing.

Single Event Betting and the Super Bowl

Last weekend, Canada lost a whole lot of tax revenue, even as it’s getting closer to decriminalize single event sport betting. It was hoped that this proposed legislation could have been passed before Christmas. As the bill is still weaving its way through debate, it’s sobering to note that the Super Bowl – Canada’s biggest betting day – has been and gone for another year, without generating the revenue so needed to bolster the economy. Statistics aren’t available for this year, but as far back as 2015 – when the whole industry was still picking itself up from recession – the CGA estimated more than $150 million in illegal wagers over the course of the weekend.

Proposed Legislation

Decriminalising single event sport betting: Currently, in Canada, the only legal sports bet is parlay betting, whereby gamblers must wager on the outcome of multiple events, in one go. Hence, the huge ‘grey market’ in single bet bookmaking, with billions of dollars going to offshore sites and apps. Bill C-13, proposed under a government bill and not just a private member’s initiative, looks set to change the situation and legalise single event sports bets. As Justice Minister David Lametti put it, “The goal of the legislation is simple. It is to bring a common practice out of the shadows and into the open. To make it legal, regulated, and safe.”

A small judge's gavel

Regulated online gaming: At the Provincial level, Ontario looks set to be the first region of Canada to allow private operators into an online market place, regulated by a newly-created subsidiary of the Alcohol and Gaming Commission of Ontario (AGCO). This would end the Provincial state monopoly, again cutting down the influence of the ‘grey market’. And liberalising the gambling market, at Federal and Provincial levels, will likely create some big winners within the industry.

And the Winners are…?

Tax revenue: With an anticipated budget deficit of $33 billion for 2021, as the impact of COVID continues, Ontario looks set to reap some big tax revenue rewards, if and when the legislation is passed. A recent report indicates that legalising online gambling would generate $547 million revenue, five years down the line. How that translates to tax revenue depends on the tax rate – probably between 15 – 25%, if other countries’ models are applied. And, for Ontario alone, legalised single event sport betting could bring revenue up to $1.47 billion for the province. So, Canada and its provinces look set to be big winners.

The big players: As COVID continues to impact on bricks-and-mortar casinos, and the growth in online gambling sites continues, the same is true of sporting events. Fans, worldwide, and more and more accustomed to streaming events, watching online, so it follows that sport betting and online gambling should have the same growth.

Keyboard and cards in hand

One company looking to capitalise on the changes is TheScore. Based in Toronto, TheScore estimates an annual gross gaming revenue potential of $1.5 – 2.1 billion and, with the potential relaxation of the gambling laws, the company’s potential to cash in was reflected in a doubling of its share price. Canaccord Genuity estimate that TheScore could reap $100 million from Ontario gambling law changes. And a $40 million bought deal launched in November last year would seem to echo this confidence and the investor interest in the legislative changes.

FanDuel and DraftKings, albeit bigger players in the US than in Canada, have both seen rises in share price and look poised to use their marketing capabilities to gain a share of the new Canadian market. Some of the biggest potential must be for media companies – TSN, the Toronto Star – and some interesting partnership opportunities, with tech companies. GAN, SG Digital, SBTech and Kambi are all set to take advantage.

And telecoms company Rogers Communications Inc. are building their strategy, creating the role of “Director, Sports Gaming”. As a payment processor, Nuvei Corp, based in Montreal, the company with the biggest tech IPO in TSX history, is already approved to operate in Colorado and Indiana, so it’s obvious they’ll likely be looking to benefit from opportunities closer to home.

But what about the players – the gamblers:

A woman's handWhile the big players are investing and competing, working on their offers, it makes sense that forthcoming changes will mean better choice for punters. Sponsorship for clubs and leagues should bring more revenue, which can only be good for the fans.

Moving from the grey market – and sometimes the black market – in betting will help gamblers be assured their money is safe, and that they are still going to be able to bet on their sport of choice but in a regulated and secure fashion. So, it looks like it’s a game where everyone wins!

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