Ontario’s Private Internet Gaming Market Is Now Live! – Media, Telecoms, IT, Entertainment

Ontario has become the first province to allow internet gaming
(igaming) by private operators who apply for and obtain
registration from a government agency called iGaming Ontario (iGO),
a subsidiary of the Alcohol Control and Gaming Commission of
Ontario (the AGCO). On April 4, 2022, the new market went live with
a press release listing those igaming companies,
called “operators,” who have been registered and fully
approved by iGO. From operators’ websites, Ontario residents
can play internet casino games, including poker, and place sports
bets. Online poker rooms in Ontario will be segregated from players
from the rest of Canada and outside of Canada. According to the
press release, there are many entities in the application process
and thus there is an anticipation that the list of registered and
approved operators will grow in the coming weeks and months.

The launch of a regulated igaming market in Ontario appears
similar to the motivation for federally decriminalizing the sale
and consumption of cannabis for recreational use: to make the licit
market safer for participants than the illicit market. According to
the iGO website, fully registered operators

…will have met rigorous standards
of game integrity, fairness, player protections and social
responsibility. Their sites will have controls preventing underage
access and measures to enable more responsible gambling. They have
entered legal agreements ensuring compliance with applicable laws,
including anti-money laundering.

The following is an overview of the application and registration
process for entities wishing to enter the Ontario private igaming
market.

Application Process – Operators

An operator is broadly defined as anyone that “operates an
internet gaming site” within Ontario. The AGCO does not
provide a comprehensive definition or list of activities that
constitute “operating a gaming site”; rather, it provides
that operating a gaming site means “having an ongoing
responsibility for the gaming site as a whole,” including key
decision-making activities, meeting compliance obligations for the
gaming site, and having authority to retain suppliers in relation
to the gaming site.

The AGCO has created a web-based portal (the Portal),
here, for applicants to apply for authorization and
registration and obtain real-time status of their applications.
Applicants must first submit their contact information through the
Portal. They will then receive necessary PDF forms for completion.
The supporting documentation accompanying the forms is
comprehensive and includes:

  • business name registration and constituting documents, such as
    articles of incorporation;

  • financial statements;

  • tax returns and tax assessments;

  • a schematic diagram showing the applicant and all shareholders,
    partners or others (including parent or holding corporations)
    owning 5% or more of the applicant and any affiliated or subsidiary
    corporations. (Similar disclosure is required from a corporate
    shareholder (including a parent or holding corporation) holding 5%
    or more of an applicant or an entity with an interest in the
    applicant.);

  • a list of proposed suppliers;

  • a gaming site diagram;

  • personal information for the directors, officers, partners,
    trustees, beneficiaries, shareholders owning 5% or more of the
    applicant and principal employees, including copies of
    government-issued identification, personal history in gaming, tax
    returns and tax assessments, and criminal background checks (if
    Canada is not the primary residence);

  • an independently audited assessment of the processes and
    controls that they have put in place to meet the “Registrar’s Standards for Internet
    Gaming.” Those applicants assessed as potentially posing
    “elevated risk” may be required to submit an
    independently audited “Control Activity Matrix
    Submission” prior to commencing operations, whereas applicants
    who are not identified as posing an “elevated risk” must
    complete the submission within three months of commencing
    operations.

There are certain additional steps for applicants, including:
executing a non-disclosure agreement, letter of agreement and
operating agreement with iGO; setting up and configuring access to
iGO’s secure data and information communication channels;
completing iGO’s anti-money laundering information submissions
and financial information submission; and participating in a
systems and data readiness cycle with iGO.

A more detailed explanation of these additional steps, and the
support that iGO will provide to applicants in fulfilling these
additional steps, can be found here.

iGO will also require operators to obtain the Responsible
Gambling Council’s RG Check accreditation within two years of
the date of the operating agreement and that operators maintain
such accreditation for the duration of the term of the operating
agreement.

iGaming Suppliers

There are two kinds of suppliers:

Gaming-Related Supplier
(GRS).
A GRS can be distinguished from an operator because
its primary role does not allow it to exercise any measure of
control over a gaming site as a whole. A GRS is an entity that
“manufactures, provides, installs, tests, maintains or repairs
gaming equipment or who provides consulting or similar services
directly related to the playing of a lottery scheme or the
operation of a gaming site.”

Non-Gaming Related Supplier
(Non-GRS).
A Non-GRS is anyone not directly related to the
playing of a lottery scheme or the operation of a gaming site.

For registration purposes, the AGCO classifies GRS in accordance
with the degree of their involvement in the business of the
operator. A GRS classification will inform the scope of
registration requirements applicable to the GRS as, generally
speaking, the more involved the GRS is in the scope of the
operator’s business, the more onerous the registration
requirements and the higher the cost to register. Examples of
classifications include “Manufacturer of Gaming
Equipment,” “Supplier of Gaming Equipment,” or
“Non-Gaming Related Supplier.”

Registration is required for GRS, and any games (software) and
“critical gaming systems” must be certified by an
independent testing laboratory. Registration is not required for
Non-GRS.

For more information about suppliers and supplier registration,
please proceed here.

Independent Testing Laboratory (ITL) Certification

Operator applicants must have their underlying technology
certified by an ITL, and in certain circumstances, that
certification may need the operator applicant to provide
information pertaining to a third-party GRS. The AGCO has provided a list of AGCO-registered
ITLs here.

Costs

An applicant to become an operator must pay a non-refundable
regulatory fee of $100,000 annually per gaming site. The
initial fee is payable concurrently with the application.
Applicants can select a one- or two-year term option, with fees
payable to match the length of the term. The AGCO has prepared a registration fee schedule
that can be found here.

Applicants may also be required to pay the AGCO’s reasonable
costs of an investigation into their application, prior to the
processing of their application, on an as-needed basis. While no
specifics are given on how these costs are calculated, the AGCO
website states that the “amount could be significantly greater
than the above-mentioned regulatory fee of $100,000 per gaming site
along with investigative charges.”

A GRS may be required to pay a regulatory fee ranging from
$2,000 to $15,000 depending on the classification attributed to the
GRS by the AGCO.

Estimated Timing

Applicants should expect a minimum of 90 days to complete the
steps required to become registered and execute the operating
agreement with iGO, although the iGO website cautions that each
operator application brings its own unique circumstances.

Ongoing Disclosure

The Internet Gaming Notification Matrix imposes on registrations
ongoing disclosure requirements: (1) incident-based notifications;
(2) scheduled reports of data indicators; and (3) other regulatory
submissions. To make the disclosure, registrants must use either
the Portal or the AGCO’s Secure File Transfer Protocol (SFTP)
Data Exchange, depending on the nature of the disclosure. A complete outline of the ongoing disclosure
requirements of operators can be found here.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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