Can the Ontario Sports Betting Market Recover from a Sluggish Debut Year?

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The Ontario sports betting market has completed its first year of operation, but there is still ample room for growth.

Since its regulated commercial launch on April 4, 2022, the iGaming market in Ontario has seen a total of CAD $35.6 billion (USD $26.5 billion) in wagers, with operators generating CAD $1.4 billion (USD $1 billion) in revenue, according to recent data from iGaming Ontario. However, it’s worth noting that Ontario does not differentiate between iCasino and sports betting in its revenue reporting.

Ontario’s Attorney General, Doug Downey, expressed pride in the province’s online gaming model, stating that it has displaced the previously unregulated market and positioned Ontario as an international leader in the industry since its launch. However, when compared to the combined iCasino and sports betting markets in the United States, Ontario’s performance may not be as impressive.

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Ontario’s revenue lags behind comparable markets in the United States

Although iGaming Ontario claims to be one of the top five online gaming jurisdictions in North America, it still lags behind smaller U.S. states such as New York, which does not even have legal iCasino.

With a population of just under 15 million, Ontario would be the fifth-largest state in the U.S. However, its online gaming revenue falls behind states like Pennsylvania, Michigan, and New Jersey, all of which have smaller populations but higher iGaming revenues.

Furthermore, these states have not even reported their March figures, which means they are missing a month of data compared to Ontario. Even New York’s sports betting revenue alone has surpassed Ontario’s entire iGaming market, totaling $1.3 billion in revenue from April 2022 to February 2023.

MarketPopulationRevenue in USD
Michigan10.0 million$1.9 billion (April ’21-Feb. ’22)
New Jersey9.3 million$2.3 billion (April ’21-Feb. ’22)
New York19.7 million$1.3 billion (April ’21-Feb. ’22, sports betting only.)
Ontario14.6 million$1.0 billion (April ’21-March ’22)
Pennsylvania13.0 million$2.2 billion (April ’21-Feb. ’22)

Anticipated outcomes in Ontario

As legislators in Ontario worked towards amending the Canadian Criminal Code to permit single-game wagering, they estimated that Canadians were already betting over CAD $14 billion annually, primarily in the unregulated gray and black markets. The gray market, which operated under the regulation of other jurisdictions, had been in existence for decades, with the Kahnawáke Gaming Commission established by the Mohawk Council of Kahnawáke in 1999.

With its significant population and well-established gaming ecosystem, there was optimism that Ontario could emerge as one of the leading online gaming markets in North America. In fact, a 2021 estimate by PwC projected that single-game sports betting in Canada, including Ontario, could generate between CAD $1.5 billion and CAD $2.4 billion within the first two years, even without factoring in iGaming at a nationwide level.

Despite the optimistic projections, some sportsbooks entering the Canadian market for the first time remained cautious about their expectations. DraftKings CEO Jason Robins, for instance, stated prior to the launch in Ontario in May 2022, “Due to the presence of gray-market operators, many of which have been present in Ontario for several years, we do not believe that the timing of our launch will have any impact on the share we are able to achieve in that province.” This indicates that the existence of established gray-market operators in Ontario may impact the market share of new entrants, potentially influencing the expected outcomes of the province’s online gaming industry.

The growth of regulated sports betting in Ontario was hampered by restrictions

The growth of the regulated sports betting industry in Ontario was hindered by stringent rules around bonuses and inducements imposed by regulators, resulting in fines for violations by operators such as DraftKings and BetMGM.

Promotions play a crucial role in attracting users to the regulated market, and Ontario’s limitations likely impeded growth, especially in the early stages. Regulators are now reconsidering the balance between Ontario’s rules and those in the US sports betting market.

Revenue figures from the province are released quarterly by Ontario regulators, and prior to the first release in August 2022, operator executives remained tight-lipped about their performance in the province.

Ontario’s sports betting industry in numbers and statistics

Ontario’s sports betting industry has seen significant growth since its legalization in 2021, with over 40 online gaming operators now operating in the province. Many of these operators have transitioned from the previously unregulated gray market. It’s worth noting that the data does not include the Ontario Lottery and Gaming Corp. (OLG), which launched its own iCasino and sports betting product in August 2021.

According to the OLG’s reported figures, online gaming revenue for the last fiscal year (April 2021 to March 2022) was CAD $500 million (USD $370.4 million).

In the first year of commercial sports betting in Ontario, over 1.6 million player accounts participated in wagers. On average, each account spent around CAD $70 per month.

While specific sports betting figures are not separated in the data, basketball was reported as the most popular sport, accounting for 28% of wagers, followed by soccer at 15%. However, the data does not provide a breakdown of market share by operator, so that information remains unknown.

Ontario Sports Betting on a Continuous Rise

Despite facing competition from the US sports betting market, Ontario’s sports betting industry has shown steady growth. While the initial migration from the gray market and the adjustment of bettors to the new legal framework took time, the fourth quarter of operation saw an impressive CAD $14 billion handle, marking a 244% increase from the CAD $4.1 billion in the first quarter. Moreover, the CAD $514 million in revenue during the fourth quarter was a significant 217% increase over the CAD $162 million in the first quarter and a 12.5% bump compared to the CAD $457 million in the third quarter.

Is the Transition from Gray Market to Legal Market a Win for Ontario’s Sports Betting Industry?

One of the noteworthy successes in Ontario’s sports betting industry has been the transition of gray-market operators to the regulated market. Provincial regulators aimed to bring unregulated operators into the legal market, allowing them to retain their existing databases. According to a survey conducted by the AGCO in March, 85% of players were found to be gambling on regulated sites, as opposed to before regulation when an estimated 70% of gambling occurred on regulated operators rather than the OLG.

AGCO Registrar and CEO Tom Mungham highlighted that the key objective in the first year of regulation was to shift Ontario players from unregulated sites to the regulated market, where they can benefit from higher standards of operator and game integrity, fairness, and player protections, including responsible gambling safeguards. Although there is still work to be done, the substantial shift towards gaming on regulated sites is seen as a positive development for players and the province.

The transition period for operators to move from the unregulated to regulated market ended on October 31, 2022, resulting in over 17 operators exiting the unregulated market after the deadline. Some of the former gray-market operators who are now operating in the regulated market in the province include:

  • 888
  • bet365
  • Bet99
  • Betway
  • Pinnacle
  • Sports Interaction
  • Unibet

Coolbet, a sports betting operator, recently withdrew from Ontario, with its executives attributing part of the decision to the presence of “entrenched” operators in the province. Dermot Smurfit, the CEO of Coolbet’s parent company, GAN, mentioned that some experts have referred to Ontario as the “most competitive market in the world.” Despite this withdrawal, Coolbet plans to continue its operations in other gray markets for sports betting in Canada.

How can Szilaghi Consulting help you start your online gambling business?

Choosing a gambling licensing jurisdiction is quite difficult, to begin with. Given the sheer number of factors that need to be considered by gambling operators, the choice can be overwhelming.

Szilaghi Consulting has been providing services to the online and offline gambling industry for over 19 years. We have helped our clients to make the right choices, realize their visions, overcome obstacles, and, above all, to succeed. We offer transparency and efficiency and we commit to always act only in your interest.

Our experience in obtaining online and offline gambling licenses differentiates us from the competition. Szilaghi Consulting can assist, from incorporating the company, creating fiscal and compliance structures, to obtaining the gambling license.

Our consultants invite you to schedule a consultation with us. We like to communicate with our customers, troubleshoot their problems, and offer solutions. We invite you to contact us today to discuss this with one of our agents. Let us help you take your business to the next level.

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