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Canadian legal experts say that a recent ruling in a Manitoba court could have future ramifications in other provinces as provincial lotteries continue to push back against grey-market operators.
A judge in the King’s Court of Manitoba granted an injunction on May 26 sought by the Manitoba Liquor and Lotteries Corporation (MLLC) against offshore operator Bodog declaring that the company had “no lawful authority to offer online gambling products and services… or to advertise such online products and services to persons located in Manitoba.”
The ruling is significant as it marks a blow to the arguments of operators who offer gaming in many Canadian provinces on a grey-market basis while provincial lottery corporations offer the only form of regulated online gaming in their respective jurisdictions.
The court specifically ordered Bodog.eu to cease operating and advertising in the province and ordered the company to geo-block Manitoba residents from utilizing its platform.
A written order outlining the judge’s reasoning for granting the order has yet to be released, but one key reason is that Bodog did not appear before the court to defend itself.
“I think that’s a material detail, that we don’t know what the court would have decided had the defense been mounted,” said Ron Segev, founding partner of Segev LLP. “I’m sure that all of us here as we read the order, we were poking holes in it, lying back on many years of practicing laws, thinking I can counter-argue this, I can counter-argue that.”
Nevertheless, a panel of Canadian lawyers speaking during the Canadian Gaming Summit last week agreed that the ruling will likely be utilized in future arguments by provincial lotteries, represented by the Canadian Lottery Coalition, against the legality of grey-market operations across Canada.
“Obviously, what the plaintiffs were looking for was a precedent to be set that would govern not simply Bodog’s conduct, but the conduct of others. And not simply the conduct in Manitoba, but potentially the conduct throughout Canada, without a doubt,” said Peter Czegledy, partner at Aird & Berlis law firm.
Danielle Bush, partner at the McCarthy Tetrault law firm, was in the courtroom for the May hearing and said that Judge Jeffrey Harris ruled from the bench and signed a prepared order from the MLLC after Bodog failed to appear to defend themselves.
“Bodog was chosen specifically because they knew they would not defend, so they were guaranteed a full order,” she said. “If this were any other situation where there was a reasonable defense counsel in place, the very first thing they would have said is, this is not the correct forum to discuss criminal activities and anything pertaining to the criminal code that should just be right off the table.
“It’s verging on improper, in my view,” she added. “There are references in the order to criminal activity by Bodog; they haven't been charged, they haven't been able to defend themselves, and yet we now have a court order saying that they are engaged in criminal activities in Manitoba, which is totally outside the pale.”
A Weapon For Future Legal Cases
Czegledy said that Bodog’s failure to appear was likely a predetermined and calculated decision.
“It wasn't random that they just didn't show up; without a doubt, they had extensive advice on the matter,” he said. “They carefully weighed the costs and the benefits of participating, and they decided that they would take the position that this would be an action that would be seeking extraterritorial effect and should not apply."
“The real question is, will it impact what they do, and I don’t think that the decision will impact Bodog’s business model at all,” he continued.
Despite the lack of impact, Czegledy said, the real value for the ruling is to give provincial lotteries a “weapon” in future arguments.
“I do think, nevertheless, that this is a decision that will be weaponized by other parties, and that's really what was sought here,” Czegledy said. “It wasn't the specific matter; it wasn't Bodog that really was at stake. It was an attempt by the complainants to try to obtain a decision that they could use for other purposes.”
Bush added that Manitoba, which contracts with the British Columbia Lottery Corporation to operate its PlayNow product in the province, also made for a strong venue for the lottery-backed approach.
“I think they also chose to go to Manitoba, because the courts in Manitoba probably have very little exposure to gaming law,” she said. “You overwhelm them with hundreds of pages of evidence about criminal activities, you have a government entity being the only person making the arguments in the court, it was a foregone conclusion.”
One of the first venues where the ruling could potentially have an impact is the Ontario Court of Appeal's pending ruling on a reference sought by the Attorney General of Ontario to gain clarity on whether regulated operators can pool liquidity from international players.
Scott Hutchison, a partner with Henein Hutchison Robitaille that represents Flutter Entertainment in the reference case, said that during the arguments on the reference in November, one of the judges asked whether a case had ever been brought before the courts alleging that the grey-market activity was illegal.
“And the answer was no, it’s never happened,” he said. “There are ten jurisdictions; these places all have their own court systems. If they didn’t like this process, they could have brought their own case there.
“And then, I think it’s about two months later, the Manitoba Lottery Corporation fires up the Bodog case, which ends up being an unopposed motion.”
Bush, who is representing the Canadian Gaming Association in the Ontario liquidity reference, said that attorneys for the lottery corporation filed the Manitoba order as supporting evidence in their opposition.
“Forty-eight hours later, they turn around and they send the order from the bench in Manitoba with no reasons to the Court of Appeals and say, you need to see this,” she said. “It’s all nested, it is certainly strategic, and the next year or so it's going to be really, really important for everybody in the industry as this plays out, frankly, across the country.”
