Ontario sports betting and iGaming program expected to generate $75 million for province over three years: Audi

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A legislative watchdog says Ontario’s competitive online casino gaming and sports betting market is currently expected to generate about $75 million in revenue for the provincial government over the next three years.

Ontario Auditor General Bonnie Lysyk on Monday released her pre-election review of the provincial government’s multi-year fiscal plan, which was included in last week’s budget.

Lysyk’s office is an independent branch of the provincial legislature that audits the government and its agencies. The auditor’s tax review is required by law, and hThe latest report included a breakdown of the estimated net income of iGaming Ontario, the government agency legally responsible for the online sports betting and casino gaming market that launched in the province on April 4.

Ontario’s new iGaming marketplace allows private online sports betting operators to legally take bets in Canada’s most populous province in exchange for a percentage of the bookmakers’ revenue. It’s at iGaming Ontario to sign operating agreements with companies and to “implement and oversee the igaming revenue reconciliation on behalf of the province,” the agency’s website states.

Lysyk’s report states that “based on the financial projection information provided to us during our review”, the provincial government expects iGaming Ontario to generate net income of $18 million (in dollars Canadians) for the 2022-23 fiscal year, which began on April 1. This is to be followed by $26 million in net income for 2023-24 and $31 million for 2024-25, for a combined three-year total of $75 million.

“That’s the bottom line that’s projected at this point in iGaming operations in Ontario,” Lysyk said in an interview.

The Auditor General told Covers that the figures for her review were obtained using information that iGaming Ontario (iGO) reportedly provided to the provincial government when preparing its budget. iGaming funds are lumped together with the province’s “other” revenue in the fiscal forecast, which forecasts total government revenue of $179.8 billion this fiscal year.

“Real [iGaming-related] income and expenses may vary,” the report notes. “Given the lack of history in this area, it was not possible to assess the reasonableness of the projections.”

Early days

Lysick added that a small portion of iGaming-related funds is also expected from sales tax, which would not be included in iGaming Ontario’s currently projected $75 million.

The Alcohol and Gaming Commission of Ontario (AGCO) also requires iGaming site operators to pay a regulatory fee of $100,000 per year for each gaming site. Bookmakers must first receive operator registration from the AGCO and sign a contract with iGO before they can enter the regulated market.

Still, the Auditor General’s numbers are the first projections of what the province’s cutback from its new iGaming program could be. The regulatory framework is the only one of its kind in Canada, where most provinces only allow government-owned lottery and gaming corporations to accept action.

While the iGaming market has several goals, such as providing greater consumer protection, another goal is to move wagering with foreign and out-of-province websites to channels that Ontario can oversee and tax, which would help fund government priorities. According to a provincial estimate, residents spent about $700 million a year on gray market sites.

The Auditor General’s report said nothing about the revenue private online gambling operators are expected to generate across Ontario. Regardless of that figure, the province’s reported tax rate for businesses participating in the new iGaming marketplace is 20% of their revenue.

However, the market is still maturing and some operators have yet to get started. Tuesday afternoon, 21 sites were active on the new market.

IGaming Ontario also indicates that its approach to income reporting will be communicated at a later date.

“iGO is encouraged by the number of operators that have joined the regulated market and the level of igaming activity seen to date,” the agency told Covers in an email Tuesday. “Given the recentness of the market launch and the expected growth as more carriers go live, iGO is constantly reviewing and revising all predictions made prior to launch. “

The situation suggests that iGaming’s projected revenue for the province may ultimately be increased.

There are no other provinces in Canada with an iGaming market like Ontario’s, making it difficult to compare apples to apples. However, in the United States, similar-sized states offering online sports betting are receiving significantly more tax revenue than the Auditor General has said is expected from iGaming Ontario in the coming year.

In Pennsylvania, Gaming Control Commission figures show that state tax owed on online sports betting totaled approximately US$65.6 million from July 2021 to March 2022. state on sports betting revenue is 34%.

Illinois, meanwhile, received $82.4 million in online sports betting taxes from February 2021 to February 2022. There, the tax on mobile sports betting revenue is 15%.

New York didn’t launch legal online sports betting until January. Nonetheless, the 51% tax rate on mobile sports betting revenue translated to $163.6 million for the Empire State in the first three months of action.

Legally speaking

As in those states, the launch of the new iGaming market in Ontario was a bit of a whirlwind, with residents of the province subjected to a deluge of sports betting advertisements.

It is now possible that the current government’s iGaming strategy will spark debate during the election campaign, as a provincial election is scheduled for June 2. The province’s plan has also been rejected by Indigenous governments, unions and at least one major country-based gambling operator.

Another concern with the iGaming model was highlighted the last time Lysyk delved into the details.

A section of the Auditor General’s 2021 annual report says the government’s approach may carry legal risks, as a significant portion of the liability could fall on private operators and not enough on the province as required by the federal Criminal Code.

“Whether a province has unlawfully delegated the ‘conduct and management’ function in a gaming system to a private entity has been the subject of previous legal challenges in Canada,” the GA report states. “We conclude that iGaming Ontario’s business model could be subject to legal challenges. »

In response, the provincial government said it had “carefully designed the online gambling model” to protect consumers and comply with the Criminal Code. The iGaming market was then launched in April.

Lysyk said on Monday that their view has not changed, although now the iGaming market is live and private operators take bets through the province’s legal structure.

“But we think it’s important to have information and understand all of this so that everyone in the legislature is on the same page when it comes to iGaming and how it works in Ontario,” he said. -she adds.

Betting budgeting

The budget presented but not passed by the Progressive Conservative government at Queen’s Park last week did not mention iGaming Ontario.

However, the budget contained projections for public enterprises, including the Ontario Lottery and Gaming Corporation (OLG), whose revenues are expected to fall from about $1.4 billion for 2021-22 to 2, $3 billion for 2022-2023.

Prior to the launch of the iGaming Marketplace on April 4, OLG was the only legal provider of online sports betting and internet gambling in the province, including through its PROLINE+ bookmaker. Today, the company is one of many fighting for this kind of business in Ontario.

According to the budget, net revenues for public enterprises like OLG are expected to grow at an average annual rate of 10% from 2021-22 to 2024-25. The government’s annual revenue from these companies was expected to grow from about $5.6 billion to $7.5 billion over the same period.

“The strong growth primarily reflects the anticipated recovery in OLG’s net income which was impacted by the closure of casinos to protect public health in response to the COVID-19 pandemic and expected increases in lottery and digital revenue from OLG,” the budget reads.

Lysyk’s report looked at public company net income estimates and compared them to historical trends to check for any significant year-over-year changes. The Auditor General also reviewed business plans to ensure internal forecasts were consistent with multi-year financial plan projections and found them to be consistent.

“In my opinion, the multi-year fiscal plan is a reasonable presentation of Ontario’s finances for the years ending March 31, 2023, March 31, 2024 and March 31, 2025, except for the understated revenue estimates provincial income from corporation tax in each of the three years,” Lysyk said in an official statement from the Auditor General. “Additionally, the contingency funds recorded in other program spending appear to be overly conservative.”

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