Ford government could lose $2.8 billion over 5 years in online betting, warns confidential report

As Premier Doug Ford’s government prepares to open up Ontario’s online gambling market, there is a warning that its plans could see the province and municipalities lose hundreds of millions of dollars in annual revenue.

That warning is in a new report from a gaming industry consulting firm, obtained by CBC News. The report was prepared for Great Canadian Gaming, the company with the largest casino market share in Ontario.

Although Ontario will have a new source of revenue by taxing newly regulated online gambling sites, the report argues that the province will end up being harmed. This is because he predicts a big shift in spending from land-based casinos to internet gambling.

Because the tax rate Ontario should impose on online gambling sites is far lower than the percentage the government takes from casino spending, the report concludes the province stands to lose $550 million in revenue. annually for a total of $2.8 billion over the period. next five years.

Before the pandemic, annual provincial revenue from lotteries and gambling was $2.5 billion.

Finance Minister Peter Bethlenfalvy, left, is responsible for the financial side of online gambling regulation in Ontario. Premier Doug Ford’s government has yet to announce the rate at which the province will tax online gambling sites, but industry sources say a 20% tax rate is being discussed. (Frank Gunn/The Canadian Press)

But companies involved in the online gambling industry say the report’s findings are flawed.

In particular, they challenge the key assumption underlying the report: that existing casino customers will suddenly start spending significantly less money in casinos and more on the online gambling sites already available to them. .

“When the regulated market opens in Ontario, nothing will change when it comes to player entertainment habits,” said Jeffrey Haas, senior vice president of DraftKings Inc., which offers online sports betting and casino products. online based in the United States.

“People who gamble in online casinos, online sportsbooks and online poker rooms will continue to do so, except they will switch from offshore to onshore gambling,” he said in an interview. . “And anyone who continues to enter real casinos to play games will continue to do so.”

Great Canadian Gaming officials declined CBC’s request for an interview about the report’s findings, but CEO Tony Rodio issued a statement.

“The report includes critical lessons from other jurisdictions that have introduced iGaming and cannibalized land-based operators in the process,” he said. “While we support iGaming in principle, the Ontario government needs to take the time to get it right.”

Woodbine Casino generated nearly $1 billion in net revenue in 2019-20, more than any other casino in Ontario, according to a report by a province’s gaming industry consultancy. The casinos return 55% of their net revenue to the Province through the Ontario Lottery and Gaming. (Great Canadian Game)

HLT Advisory Inc.’s report, titled Assessing the Gambling Market in Ontario, is labeled “Private and Confidential” and dated Jan. 11.

He says the government’s proposed “open license” model for online gaming will allow online sites to more than triple their share of Ontario’s overall gaming market, estimated at around $7 billion a year.

“If an open license electronic gaming model is implemented in Ontario, the electronic casino would capture a significant share of the total casino market,” the report states, basing this conclusion largely on the experience of the United Kingdom after the opening of its electronic game market in 2005.

Land-based casinos in Ontario are currently required to return 55% of net gaming proceeds to the province. The Ford government has yet to announce what percentage it will levy on regulated online gambling sites, but the report bases its assumptions on a 20% tax rate, which industry sources say is probably correct.

Finance Minister Peter Bethlenfalvy, who is responsible for Ontario’s internet gambling regime, declined an interview request.

Ontarians spend up to $1 billion a year to gamble online

Ontario casinos have been hammered during the COVID-19 pandemic. They were completely closed for months, and when they were allowed to reopen they faced capacity limits. Border travel restrictions also meant that casinos in cities such as Niagara Falls and Windsor were deprived of their American customers.

All casinos in Ontario are currently closed under the province’s latest restrictions, introduced on January 3 as a result of the Omicron variant of COVID-19.

Industry figures estimate that Ontarians spend about $500 million a year on internet gambling, almost entirely on companies that operate outside the province. The provincial government puts the figure at $1 billion.

Sites such as PokerStars, JackpotCity and Bet99 advertise heavily to the Ontario public, and there is nothing stopping Ontario residents from gambling online at sites based in other jurisdictions.

Last July, the government announced the creation of iGames Ontario, the agency that will oversee online gambling offered by companies that sign agreements with the province.

Caesars Casino Windsor has already been hit hard by the pandemic with closures, capacity restrictions and fewer visitors from the United States (Fred Thornhill/The Canadian Press)

CBC News has asked the Department of Finance to provide its forecast for the impact online gambling will have on provincial revenues.

The province hasn’t included electronic games in its financial projections, but more information may come in the next budget, ministry spokesman Scott Blodgett said.

“The government intends to establish a competitive marketplace for legal online gambling that will reflect consumer choice while minimizing risk to consumers who gamble on these websites,” Blodgett said in an email.

“The new iGaming market is being developed to exist alongside on-site gaming activity in the regulated Ontario market, and not to interfere with [Ontario Lottery and Gaming’s] income generation.”

How much online gaming will eat into casino revenue in Ontario is a hotly debated question, says Paul Burns, president of the Canadian Gaming Association, which represents companies from all sectors, including land-based operators. and Web.

Last May, with casinos across Ontario closed due to pandemic restrictions, a COVID-19 vaccination clinic was held at Woodbine Racetrack and Casino in Toronto. (Evan Mitsui/CBC)

“Drawing comparisons from different markets in different jurisdictions” may not be an accurate picture of what will happen when Ontario begins to regulate online gambling, Burns said in an interview.

“Online gambling is [in Ontario], it’s just not regulated, it’s not controlled. It’s not subject to the same regulatory standards that casinos are held to,” he said.

Ontario’s casino operators want to play a role in the online gaming and level playing field with online casino operators only, Burns said.

“They’re eager to be able to participate and compete and create an opportunity for their own customers who can play on other people’s sites, to try and bring them back into their business,” he said.

The consultant’s report predicts that the changes will result in a 25% reduction in the land-based casino workforce, resulting in the loss of some 2,500 jobs.

Net casino spending — the amount players spend less the prizes they win — was estimated to be around $4 billion a year in Ontario, before the pandemic. (nazarovsergey/Shutterstock)

“I am deeply concerned about the impact this is going to have on jobs, but also the overall impact on our communities and our province,” said Jerry Dias, national president of Unifor, the union that represents the bulk of the 10,000 casino employees. in Ontario.

“From a jobs standpoint or from an economic strategy standpoint, it’s a fool’s game,” Dias said in an interview. “It makes no sense to me.”

Ontario municipalities that host casinos would also lose $35 million to $40 million in annual revenue, according to the consultant’s report.

“There is cause for concern, but we’re not overly concerned,” said Dave Ryan, the mayor of Pickering, Ont., where a casino with 2,400 slot machines opened next summer last summer. from Highway 401. The municipality is expected to welcome $14 million in revenue per year.

“We believe there will always be room for bricks and mortar play,” he said in an interview. “We’re social animals. People like to go out and get together and enjoy that experience. Plus there’s the entertainment factor that you don’t have online.”

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