Ontario has been the frontrunner in shifting the landscape of the sports betting market in Canada. Other provinces have been watching closely to see the results of the change and monitor how the population reacts. While it may seem trivial to assume that the government would likely experience additional revenue from allowing private operators, prior to the changes in Ontario, there were concerns about market share switching from land based wagers to online.
The concerns arise from the nature of government revenue from the sector. The tax rates imposed on land based casinos are 55% of net gambling proceeds which supersedes the tax rate for online e-casino operates at 20%.
The hypothesis that allowing online casinos to enter the market will shift land base casino goers to then spend their market share online poses a risk for the government to collect less revenue that initially recorded.
Some estimates leading up to the changes stated that the province could lose out on $550 million in revenue over 5 years due to the diFerences in tax rates.
At the time of the estimates, the overall Ontario gambling market was projected to be around $7 billion. With an open license surrounding iGaming, online gaming providers were expected to triple their share of the overall market.
Reports also tied open license iGaming models to the impact they had in the United Kingdom when the markets opened in 2005. During this time land based establishments lost a large chunk of traFic and wagers to online operators.
This is an interesting angle for other provinces to consider when looking towards adopting an open license iGaming model. With risks such as, sports integrity, responsible gaming, and overreach in advertising, declining revenues would play a major role in holding oF such changes. Jurisdictions will make such changes under the pretense of job creation and additional revenue so careful implementation is necessary to avoid losses in this manner.
Thus far, the hypothesis that the government would be exposed to declining revenue has proven to be false in Ontario’s open license era. In other provinces this may still be an areaof consideration to ensure positive changes.
