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Canadian legal experts say that an Ontario court decision that could open the door for online gaming companies to pool liquidity internationally could come any day.
The Court of Appeal for Ontario heard arguments in late November after a filing by the Ontario provincial government in February asking the court if operators can legally participate in games involving individuals outside of Canada.
A favorable ruling, supporters say, would open the door for operators to reach partnerships with jurisdictions internationally, potentially including American and European jurisdictions, to facilitate games such as daily fantasy sports, progressive slots and online poker, which require larger liquidity pools to maximise their appeal.
The upcoming ruling would not allow for interprovincial pooled liquidity within the country.
The debate over the reference became surprisingly contested when the Canadian Lottery Coalition (CLC), which represents government-owned lottery corporations in British Columbia, Saskatchewan, Manitoba, and the Atlantic territories, intervened in opposition to the reference from Ontario's attorney general.
The Mohawk Council of Kahnawake, which licenses a number of companies that offer online gaming in provinces other than Ontario, also intervened in opposition to the reference being granted.
During panel discussions at last week's Canadian Gaming Summit in Toronto, the upcoming decision and the ongoing battle between provincial lottery corporations and Ontario-registered operators were a frequent theme.
“Tension between the lottery corporations and the operators who are active in Ontario, I mean, it's high and probably between the lottery corporations and Ontario,” said Jack Tadman, a Canadian lawyer with GME Law in Toronto.
“The courts are deferential when there's no intervention from lottery corporations or attorneys general, and I think that Ontario assumed they would get to come in, make their arguments… maybe Kahnawake would be an intervener, and that would be the end of it,” he continued.
“But clearly this is part of a broader strategy by the CLC to just, I don't want to say, be annoying, but certainly they're making things more difficult for Ontario and fighting back.”
Peter Czegledy, partner with Aird & Berlis LLP, said the opposition from the CLC was likely motivated by business goals and protecting market share.
“The reality is, Ontario is a little further ahead than some of the other jurisdictions in the country on the online market, and it has a number of very sophisticated operators that are now part of the online market, parties that do have business in other jurisdictions that offer exactly the kind of liquidity that we're talking about,“ he said.
“And so to the extent that those operators start operating a shared liquidity pool in Ontario, then that, potentially down the road, impacts what happens in other jurisdictions,” Czegledy added.
“So I think there are a number of reasons why, aside from the fact that the lottery corporations historically have sought to protect market share generally, and that is, they were monopolist providers, and still are in the regulated market in many jurisdictions, and that can't be ignored.”
Several lawyers agreed, however, that the extensive filing by the coalition in the case had little to do with the reference itself, instead taking shots at grey market operators for alleged violations of Canadian law.
“I think this is very much a public relations exercise,” said Ron Segev, founding partner of Vancouver-based Segev LLP. “It's a great forum to air some dirty laundry.
“The Canadian Lottery Coalition makes almost exclusive reference to the AGCO-registered operators taking unlawful gameplay from other provinces, which is a peculiar thing to talk about, given that the reference actually says international players.
“We're not looking for a reference for the rest of Canada; we're looking for a reference with respect to international players. And so it's like going to the court and saying, I'd like to talk about apples, and I'd like your opinion on apples, and someone coming in and saying, bananas are not good.”
“If you look at the materials in this case, because it wasn't just the actual arguments that they put forward, it was also hundreds, hundreds of pages of just screenshots of ads, and I think they're hoping for something from the judge that becomes public record, that addresses the activities of the operators that they're unhappy with,” Tadman added.
Whatever the ruling may be, it may not be the final word on the issue, said Adam Goldenberg, a partner at the McCarthy Tetrault law firm who represented the Canadian Gaming Association in the reference case.
“There is a provision in the Supreme Court Act which creates a right of appeal to the Supreme Court of Canada from the Court of Appeals decision in any reference question, which means the likelihood of this case ending in the Court of Appeals for Ontario is, I think, relatively low,” he said. “So stay tuned.”
