Mohawk rejects Ontario’s claims on the first day of online sports betting hearings

A court hearing over the legality of the competitive online sports betting market in Canada’s most populous province began with the party filing a lawsuit challenging the Ontario government’s claims.

For example, counsel for the Quebec-based Mohawk Council of Kahnawà:ke (MCK) disagreed entirely with an Ontario government agency comparing the competitive online gambling market to the province’s model for operating brick-and-mortar casinos.

This model, according to a recent fact sheet for iGaming Ontario (iGO), involves the provincially owned Ontario Lottery and Gaming Corp. (OLG) contracts with private companies (such as Caesars Entertainment Inc.) to operate physical casinos. iGO claimed that this was similar to online gambling operators who enter into a contract with the agency before they can offer their products in the competitive market.

But no court has truly addressed how OLG “runs and manages” casinos, and there is no analogy to online gambling, according to legal counsel for MCK, an Indigenous government organization with long-standing ties to the online gambling industry.

While federal lawmakers may have envisioned provinces working with service providers on payment processing, property management or other gambling-related issues, MCK’s lawyers don’t believe the law allows for “wholesale” outsourcing.

“There is a difference between operating a casino and operating and managing a game that takes place in that casino,” Nick Kennedy, an associate at Olthuis Kleer Townshend LLP and an attorney for MCK, said at one point during Tuesday’s hearing.

The comments came on the first of three days to hear arguments on the MCK’s motion challenging the constitutionality and legality of Ontario’s highly competitive iGaming market.

Ontario Superior Court Justice Lisa Brownstone is overseeing the proceedings in Toronto. The hearing began on Tuesday with arguments and counterarguments from MCK, which announced the challenge in November 2022.

In short, the MCK and its lawyers claim that private operators (and not the province) “operate and manage” iGaming in the competitive market. If true, it could mean the province is violating provisions of the Federal Criminal Code, which determines what type of betting is legal in Canada.

What “conduct and administration” means (or meant), who directs and manages, and exactly what that entails could all factor into the judge’s decision.

“The central theme in this application is the interpretation of ‘conduct and management’ in.” [section] 207(1)(a) of the Criminal Code,” iGaming Ontario’s Factum states. “If Ontario implements and administers the iGaming regime, it is legal; If Ontario doesn’t perform these functions, then it won’t.”

However, there is limited case law on the actual meaning of conduct and conduct and no definition in the Criminal Code. The factum of the MCK to the court states: “[n]o Case examined what is required to operate and manage a gambling website.”

However, Ontario considers iGO to be the one that carries out and manages its various functions, while the MCK considers it to be the operator.

Kennedy said the 1969 debate over gambling law reform, which helped create the “conduct and management” exemption for provincial gambling, focused on “state lotteries” rather than competitive casino markets. He also called it “very telling” that federal lawmakers left few options for provinces to license gambling activities, such as for charitable purposes. This was not the case with private operators.

There is “a limit to this theory” that the federal government leaves everything gambling-related to the provinces, Kennedy once said.

“The separation of powers exists, you can’t just interpret it away,” he said in court at another court.

A declaration of interdependence

The MCK is asking the court for a formal declaration that private operators are those who operate – or operate and manage – the games offered under the framework introduced by Ontario in April 2022. The council also wants the court to invalidate the laws and regulations that prop up the iGaming market because they would help enable a gambling framework that supposedly leaves operators in control and is therefore in conflict with the Federal Criminal Code.

“The Supreme Court of Canada and other courts have stated that in situations such as these, federal supremacy prevails,” the MCK fact says. “Ontario’s legislation enabling the iGaming program is therefore ineffective to the extent that it allows operators to conduct and manage gaming on their websites.”

Depending on its outcome, the case could impact online sports betting and online casino gambling in Ontario, which has become a major business.

Billions of dollars are wagered each month in the province’s competitive market with dozens of private-sector companies including bet365, DraftKings and FanDuel. This applies in addition to the OLG online gambling offering. No other province in Canada is currently doing anything similar.

The province’s lawyers are on track to address Judge Brownstone on Wednesday, even though they have already filed written submissions in support of iGO’s management and management of the iGaming market.

On Tuesday, however, Kennedy and the MCK sought to refute statements in those court documents, including iGO’s claim that a province operates and administers a gambling regime even if it only provides enough oversight to control the risks involved.

“What matters – and what has always been important to Parliament – ​​is that provinces have sufficient control to mitigate the perceived harm that can arise from gambling,” iGO’s Factum says.

Funds and federal agencies (or lack thereof)

However, the MCK does not accept that conduct and management merely amount to this type of control, or that federal legislators intended to give provinces complete gambling freedom within their borders.

And while iGO sees itself as an entity that operates and manages iGaming through contracts with private operators, the MCK views iGO more as a regulatory body that the province already has. It is private operators, the council said, who own the websites, run the games, collect money from players and keep most of the profits.

Kennedy also said there is no evidence that there is any greater or lesser problem gambling, money laundering or other risks in the iGaming market in Ontario. He cited the province’s auditor general’s 2021 report that said “key responsibilities” for gaming integrity were being delegated to the private sector and warned of possible legal threats.

Additionally, Kennedy pointed out the advertising concerns that have emerged. In response, the Ontario Alcohol and Gaming Commission is now about a week away from enforcing a ban on the use of athletes and certain celebrities in iGaming-related advertising.

“The little we know about it shows that it was the regulator that had to intervene to limit the damage,” Kennedy said.

Money is another factor in this case, and the MCK claims Ontario’s environment is causing economic harm to its community, which is about 20 minutes from Montreal. The Council established the Kahnawà:ke Gaming Commission (KGC) in 1996, and since then the entity has licensed and regulated online and land-based gambling within and from Mohawk Country. The Sports Interaction betting brand is also operated outside of Ontario by Mohawk Online Ltd. operated, a company wholly owned by MCK.

Meanwhile, iGO and the province have highlighted Ontario’s control and ownership of the revenue from the iGaming program as an argument for its implementation and management.

However, Kennedy said it “doesn’t matter much in a sense” since operators are contractually entitled to about 80% of gross gaming revenue no matter what.

Finally, MCK’s lawyer argued that it would be “dangerous” to infer anything from the federal government’s apparent silence on the iGaming market in Ontario, even though the council had written to the Attorney General of Canada asking him to challenge the proposal in court.

“They also chose not to show up to say it was constitutional,” Kennedy said. “It goes both ways.”

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