New York Can Learn Plenty From Ontario’s Roaring Online Casino Sector

Written By Dave Briggs on July 8, 2024
Canadian side of Niagara Falls. New York's northern neighbor on the other side of Niagara Falls launched an enviable, wide-open online gambling sector two years ago.

New York can learn a lot from its northern neighbor on the other side of Niagara Falls when it comes to launching a regulated online casino market.

In just two years, Ontario has proven to be one of the most open and successful online gambling jurisdictions in the world.

And that’s at a 20% tax rate that is far below the New York sports betting tax of 51% and also far below the tax rates proposed for New York online casinos, should they become legal.

Senator Joe Addabbo’s most recent bill to legalize online casinos, which failed, suggested a tax rate of 30.5%.

Snapshot of one of the world’s most successful online gambling sectors

In its second full year of operation, which ended March 31, highlights of the Ontario online gambling market included (all financial figures in US dollars converted at the Bank of Canada’s average exchange rate for the fiscal year of 0.7415):

  • Total online gambling revenue of $1.78 billion
  • Total tax revenue to municipal, provincial and federal government of $919.5 million
  • Nearly 15,000 full-time equivalent jobs in Ontario tied to the online gambling sector
  • Direct taxes to the province of Ontario of $356 million

The second and third items on that list come from Deloitte Year 2 report analyzing the economic contributions of Ontario’s regulated online gambling market. That report was released in early June by iGaming Ontario, the provincial body known as iGO that oversees online gambling.

How did Deloitte arrive at total tax revenue of $919.5 million from online gambling revenue of $1.78 billion if the tax rate is 20%?

Total government revenue includes “taxes on products and production… corporate and personal income taxes stimulated by Ontario’s iGaming industry” on top of the government’s 20% cut of the online gambling revenue.

That’s important to note for New York. The positive economic impact from the state legalizing online casinos would greatly exceed just the tax rate on gambling revenue.

Ontario designed to transition illegal operators to regulated market

Ontario is home to 50 legal online gambling operators offering 80 separate gambling sites. Online casinos, sports betting, poker and even bingo are all legal in Canada’s most populous province.

The reason Ontario is a truly open market with no cap on the number of operators is because one of the government’s main goals was to encourage operators in a once-flourishing illegal sector — one that had been taking bets from Ontarians for more than two decades — to transition to a regulated market.

The relatively-reasonable tax rate of 20% was set, in part, to attract as many operators over to the regulated market as possible.

Bottom line, the initiative has been successful with iGO reporting that over 80% of formerly-illegal operators have transitioned to Ontario’s regulated sector.

That’s a win both for Ontario consumers, who are now protected, and the government which collects tax revenue from an activity from which it once earned nothing.

It is estimated that in 2023 New York missed out on more than $5.35 billion in gross gambling revenue from wagers New Yorkers placed in the online black market.

Online casinos provide 75% of Ontario’s online gambling revenue

The success of Ontario’s wide-open model hinges on the importance of regulated online casinos.

Compared to sports betting, online casinos produce higher margins for operators at lower cost. That’s the reason almost all of Ontario’s 50 operators offer online casinos, but only some 30 of them offer sportsbooks.

In the second year of the Ontario market, 75% of the $1.78 billion in total online gambling revenue — or $1.34 billion — came from online casinos.

Online sports betting revenue was $436 million, and poker revenue was just under $50 million.

The importance of online casinos to the bottom line is also growing. In the first year, online casinos accounted for 67% of Ontario’s total online gambling revenue pie.

Ontario beat out Pennsylvania, New Jersey and Michigan in Year 2

How does Ontario rank when compared to states that also offer both online casinos and sports betting? Pretty darn good.

A PlayCanada analysis found that Ontario’s Year 2 figures exceeded the second year numbers of Pennsylvania, Michigan and New Jersey. By that score, Ontario was the #1 online gambling jurisdiction in all of North America.

In Year 2, they ranked as follows:

  1. Ontario — $1.78 billion
  2. Michigan — $1.74 billion
  3. Pennsylvania — $1.56 billion
  4. New Jersey — $441 million

Keep in mind, Ontario has a population of some 15.5 million, which would make it the fifth largest state in the union if it was part of the United States.

While Ontario is home to fewer people than New York (19.5 million), it has a higher population than Pennsylvania (13 million), Michigan (10 million) and New Jersey (9.3 million).

bar graph showing Online Gambling Comparison Year 1 and Year 2

Ontario Lottery numbers will push province’s online revenue figures higher

What’s also important to keep in mind is Ontario’s revenue figures do not include numbers from the Ontario Lottery and Gaming Corporation, which runs a robust online gambling site of its own. The OLG will release its figures later this year.

As a guide, in the first year of Ontario’s open market — which launched April 4, 2022, — the OLG reported online gambling revenue that was about 24% of the combined online gambling revenue reported by the other legal operators.

Using that just as a benchmark for year two, if OLG stays steady at 24% of the total market, that means Ontario’s yearly totals, as reported by iGO, are missing more than $427 million. By that count, Ontario’s second year revenue was more like $2.2 billion.

That’s way ahead of where Michigan, Pennsylvania and New Jersey were after year two.

Also, cannibalization alarmists take note: The OLG has grown its online gambling revenue despite the increased competition. So, Year 2 figures will likely exceed those the provincial lottery operator earned in the first year.

Ontario sector grew 71% year-over-year

Ontario’s online gambling sector has also shown incredible growth in just two years.

Leaving aside OLG numbers and just counting iGO’s total online gambling revenue figures, the sector increased $741.5 million from the first fiscal year ($1.04 billion) to the second ($1.78 billion).

Province ahead of the curve on ad restrictions, banning “risk free” language

Ontario’s regulator, the Alcohol and Gaming Commission of Ontario, the parent body to iGO, has also been ahead of the curve in terms of restricting gambling advertising.

The AGCO does not allow the advertisement of bonuses, inducements and credits. Operators can offer them – and communicate them in direct marketing – but cannot fill the airways with huge offers to get people to sign up.

Part of that includes not allowing the words “risk free bet” and other variations. This is a trend now gaining momentum in the US.

The AGCO has also banned operators from using celebrities — defined as entertainers, current and former professional athletes and social media influencers — to promote gambling sites. If the messaging is primarily about responsible gambling, celebrities can be used.

Prior to this ban going into effect earlier this year, BetMGM, for example, used Wayne Gretzky, Connor McDavid and Jamie Foxx in its ads in Canada. After the ban, the Gretzky and Foxx ads disappeared and McDavid pivoted to a new responsible gambling campaign.

Unlike New York, Ontario’s journey to launch was mostly seamless

Unlike New York, which has struggled to launch online casinos despite having the most lucrative online sports betting market in North America, Ontario’s journey was rather painless.

In fact, the province was making preparations to launch an open market long before the federal criminal code was amended in August of 2021 to allow single-sports betting. That change was Canada’s version of the 2018 Supreme Court decision overturning PASPA that allowed sports betting in states other than Nevada.

A little more than eight months later, Ontario launched its open market. It has grown exponentially since. Today, it is home to a broad mix of US, European and Canadian operators, many of whom are not found in other North American jurisdictions.

Today, Ontario is the only Canadian province or territory to offer online gambling from anything other than the provincial lottery corporation option.

Though, Alberta is planning to become the second province to offer an open model. Alberta’s leaders have said it will closely follow Ontario’s model.

Something New York would be wise to do, as well.

Photo by Shutterstock
Dave Briggs Avatar
Written by
Dave Briggs

Ontario native Dave Briggs is the managing editor for PlayCanada, PlayMichigan and PlayPennsylvania for Catena Media. His expertise is covering the gambling industry in North America with emphasis on the casino, sports betting, horse racing and poker sectors.

View all posts by Dave Briggs
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