Canada losing $14B a year to black market thanks to sports betting prohibition, casino boosters say

John Paul Tasker · CBC News ·

The Canadian gaming industry is losing billions of dollars in sports betting revenue to the black market each year due to federal prohibitions — and a recent legalization push in the U.S. could further threaten the viability of casinos in this country, proponents say.

Casino boosters in Canada, including NDP MP Brian Masse, are hoping the recent legalization of single-event sports betting in U.S. border states like Michigan and New York will force the Liberal government to act now to save casino jobs — especially at places like Caesars Windsor and the Niagara Falls-based Fallsview, which depend on a steady stream of U.S. gamblers to stay afloat.

A years-long effort to legalize single-event sports betting — betting on a single football game, for example — stalled when the federal Liberal government voted against legislation to allow this sort of gambling in Canada.

Voting against the legislation in 2016, the government cited major sports leagues’ claims that single-event betting might lead to match-fixing. But that opposition has been blunted since sports leagues, including the NBA and NHL, have partnered with U.S.-based casino operators like MGM Resorts to bolster sports betting stateside.

The recent legalization of single-event sports betting in U.S. border states like Michigan and New York threatens Canadian casinos like Caesars Windsor in Windsor, Ont., where the practice is illegal. The black market and offshore sports betting market is valued at $14 billion a year, according to the Canadian Gaming Association.

Masse, who introduced a private member’s bill to dismantle the prohibition, said the Liberal government should take up the issue when the House of Commons returns next week. The government only needs to drop one sentence from the Criminal Code to end the prohibition — a change Masse said could be made through legislation or an order-in-council from cabinet.

“We are in a lose-lose position right now. We would have been ahead of the curve if we had actually defined our own destiny, but instead U.S. courts, as expected, moved ahead and left us behind. The consequences for Canada are very high,” Masse told CBC News.

A recent U.S. Supreme Court ruling overturned decades-old federal limits on sports betting in states other than Nevada. The result has been a push by state lawmakers — notably in New Jersey, New York and Michigan — to legalize single-game bets at casinos, racetracks and online.

Single-event legalization has unleashed a revenue boom for state coffers already; New Jersey casinos collected $4.5 billion in revenue last year alone.

Sports bettors in Canada are limited to “parlay” bets — meaning they have to place bets on more than one game, and pick the winning team in each contest, to see any sort of windfall. The odds of a winning bet are low. Canadians gamble roughly $500 million a year in parlay bets through lottery games like Pro-Line.

“Capital investments in Canada are being delayed, jobs are being lost, customers are going to be lost for the long-term. We inherit all the problems of sports gambling, but we don’t get any of the benefits or the supports to deal with the situation,” Masse said.

Canada’s gaming industry employs about 180,000 people — many more than the automotive manufacturing sector.

Masse said Windsor-area Liberal candidates in the last election promised voters a re-elected Trudeau government would do away with the Criminal Code prohibition to help those casinos compete, but the Prime Minister’s Office has since shied away from the issue.

Not an ‘immediate priority’: minister says

In a statement, Justice Minister David Lametti’s spokesperson said gambling reforms are simply not “immediate priorities.”

“Minister Lametti was honoured to receive his mandate letter in December, which outlines the immediate priorities he has been tasked with. Reforms to gambling laws are not included as part of these immediate priorities,” Rachel Rappaport said.

“Our government is aware of the recent changes to the legal frameworks for legalized gambling in the United States, which have produced consequences on both sides of the border. We continue to monitor the situation, as well as meet with and hear from individuals and groups that have been affected.”

Masse said the government’s stance betrays the voters in places like Windsor and Niagara Falls who trusted the Liberals when they said they’d take action.

“It’s very much a paternalistic approach by the federal government, denying Ontario, Quebec and B.C. and others. The message is basically, ‘Canadians can go to the internet or the black market, instead of a regulated, open market where provinces can make their own decisions,'” Masse said.

“It’s a bizarre position and I’m quite shocked that they’ve been able to skate on this so long.”

An estimated $14 billion in annual sports betting — $10 billion through the black market through bookies and $4 billion more through off-shore online outlets, according to figures from the Canadian Gaming Association — is wagered by Canadians through illegal channels, beyond the regulatory control of the government. The biggest draw of these other outlets is the fact that they allow bettors to gamble on just one game.

Paul Burns is the president and CEO of the Canadian Gaming Association, the lobby group that represents casino interests.

Burns said the Liberal government should simply adopt the approach it took to the legalization of cannabis. Prime Minister Justin Trudeau proposed changes to drug laws as a way to take profits out of the hands of criminals and legitimize a practice dominated by illegal sellers. Burns said the same standard should apply to sports betting.

“This would take money out of the hands of bad guys and give real benefit to the hundreds of gaming communities across the country,” Burns said.

“‘This issue isn’t going away. It’s getting worse. We’re saying to the federal government, ‘Don’t put us in a position where we have one arm tied behind our backs.’ These are great, good-paying jobs and they’re threatened. And yet, there’s a very simple solution.”

Federal and provincial governments don’t get a cut of revenues from gaming through these illegal channels. For the province of Ontario, for example, that means an estimated $400 million a year in lost profit, said Jim Lawson, head of Woodbine Entertainment, the group that runs the main horse racetrack in Toronto.

“So much money is moving offshore and offshore now includes sports wagering in the U.S. We’re really starting to feel the pressure — it’s having a dramatic impact,” Lawson told CBC News.

“There’s a huge revenue miss at a time when government is trying to keep up with health care and education costs. And when I say a revenue miss, we’re in the hundreds of millions of dollars range.”

Lawson said Woodbine Entertainment employs 15,000 people in Ontario directly or indirectly, but the horse racing industry is facing “extreme challenges” due to demographic shifts and robust competition from the U.S.

He said flowing some of the sports betting through racetracks and off-track betting shops would help stabilize an industry crucial to rural communities.

“We should be allowed to participate rather than it all going into foreign pockets and for-profit offshore operators,” Lawson said, adding that leaving horse tracks out of the equation would “decimate” racing.