This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.
According to the Ontario government and Statistics Canada, COVID-19 has resulted in millions of lost jobs and tens of billions of dollars in deficit spending. Its impact has been devastating to many areas of the economy as many people have been staying inside due to the emergency orders.
The requirement to stay indoors, however, has led to a sharp rise in online gambling, with online searches for casinos reaching record highs and many online businesses internationally reporting year-over-year revenue growth between 67 per cent and 118 per cent since the lockdowns were instituted.
Under the Canadian Criminal Code, providing online gambling or facilitating single-event sports betting, two of the most lucrative areas of gaming globally, are indictable offences. Despite these prohibitions, offshore gambling operators, some of which are in jurisdictions known for money laundering, currently target and provide Canadians with online gambling and sports betting services. The Canadian Gaming Association, the national trade association for gaming companies, estimates that illegal operators bring in roughly $14 billion from Canadians each year.
The legalization of online gaming and single-event sports betting, the latter receiving support from the commissioners of the major sports leagues, presents an opportunity to benefit many stakeholders. Using the Kahnawake Gaming Commission as a template, the provinces can use legalization to economically include Indigenous communities in the rollout, providing them with opportunities for self-governance and self-sovereignty.
While there is understandable apprehension against legalization due to the potential for addiction and its associated consequences, bringing online gambling operators under the oversight of Canadian authorities may outweigh those concerns and allow for regulations that can promote player safety and punish unlawful actors.
Offshore online gaming operators
Canadians and Ontarians regularly gamble with unregulated offshore online gaming operators that are widely recognized to be functioning illegally under the Criminal Code. While there are no specific legal definitions for online or digital gaming, online gaming sites are widely accepted to be caught under the current provisions of the Criminal Code. However, offshore operators continue to freely advertise their online gaming sites through mainstream outlets in Canada, seemingly in contravention to the rules.
When offshore operators advertise their services in Canada, they are typically engaging in a “bait and switch” approach. This is accomplished by advertising their “free to play sites,” which technically in itself isn’t in contravention of the Criminal Code or Consumer Protection Act. However, after familiarizing Canadians with their free services, they typically use varying methods to direct them to their paid gambling sites and keep them there.
Canadian media outlets are aware of this and require companies to contractually represent that they do not engage in these activities when selling advertising spots. These activities appear to be ongoing because based on case law, Canadian authorities have almost exclusively prosecuted online gambling companies with a physical presence in Canada.
The only two high-profile criminal proceedings in Canada against offshore gaming operators were ones that had offices in Canada. This was the main commonality in R v. Starnet Communications International Inc. 2001 CarswellBC 3525 and Cyber World Group (Cyber World’s case did not go to trial; they pleaded guilty and agreed to pay a fine). Both had physical offices in Vancouver and Montreal, respectively, at the time of their legal troubles.
This sets up somewhat of a “home court” disadvantage in Canada. Foreign companies are able to target Canadian citizens and subject them to gambling without any addiction or safety protections, seemingly outside of the reach and protection of government authorities, whereas local companies that could be regulated face the full brunt of the law.
The effect on the current landscape is that Canadians are being targeted by offshore companies through advertising and are being provided with the opportunity to gamble with companies that in practice operate outside of the apparent reach of Canadian criminal laws with minimal to no anti-addiction or consumer protection measures in place. Many of the jurisdictions housing these offshore companies, such as the Isle of Man and Gibraltar, have been associated with terrorist financing and money laundering. Considering Quebec went so far as to pass a bill (Bill 74) attempting to block the Internet service providers (ISPs) of offshore gambling companies, it is clear that their use is widespread.
Sports betting: Times are changing
In recent years, there has been a growing consensus of support for single-event betting. In 2018, the U.S. Supreme Court in Murphy v. NCAA 2018 U.S. LEXIS 2805 struck down the clause in a federal statute that prevented states from regulating their gambling industries. Since then, 17 states aside from Nevada have passed bills to legalize sports betting.
After recognizing the amount of lost revenue from not allowing single-event betting, in 2019, the Ontario government reached out to the federal government to legalize single-event sports betting. Adding more weight to the argument is that the commissioners of the five major sports leagues (NBA, NHL, MLB, MLS and CFL) sent a joint statement urging the federal government of Canada to legalize single-event sports betting.
It has come to a point where even the leagues themselves are arguing that single-event betting will not affect the integrity of the game, making inaction on amending the Criminal Code increasingly difficult to justify.
The introduction of online gambling and single-event sports betting brings the opportunity to allow Indigenous communities to share in the economic benefits and achieve greater self-sovereignty. Following the structure of the Kahnawake Gaming Commission, if legalized, the hosting of Canadian online gaming companies can be mandated to be done on Indigenous lands.
This would allow for participating communities to generate revenue from hosting the services and ensure that the interactive gaming activities they rent space to, like with the Kahnawake Gaming Commission, are “conducted responsibly, fairly, honestly and in the best interests” of all affected parties and are not associated in any way with crime or criminality.
With the economic slowdown that is being experienced as a result of COVID-19, now may be the right time to legalize online gambling and single-event sports betting. Bringing the operations of these commonplace activities under the oversight of Canadian laws while providing economic empowerment and self-sovereignty to Indigenous communities makes legalization hard to ignore.
Alex Davis is a Toronto-based corporate and technology lawyer. He assists both traditional and innovative businesses with their strategies and legal needs. He is the Founder of Davis Law and can be reached at firstname.lastname@example.org.
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