The launch of a regulated market for online sports betting in Ontario was supposed to be a landmark moment for the industry, as Canada’s most populous province is also one of the largest subnational jurisdictions in North America.
Ontario would be the fifth-largest state by population if it were in the United States. And if you were to rank states with legal sports betting, Ontario would be the second-largest in terms of people living there, behind only New York.
And yet, despite all of this being baked into the assumptions around the size of the Ontario sports betting market, there is still no official confirmation about the amount of money that residents are gambling in the province’s new internet-gambling market.
The iGaming market launched in early April and now boasts more than 20 regulated operators offering both sports betting and online casino games. However, despite recurring rumblings that numbers about the market should be coming soon, they were not out before this article was published.
So, while we await official figures (which could come soon!), here’s what we know about the size and setup of Ontario’s iGaming market:
The tax rate (so to speak)
Canadian federal law prevents provinces, such as Ontario, from a regulatory scheme too similar to those in the United States. For instance, a Canadian province, like Ontario, could not simply issue licenses to an online sportsbook operator and let them go about their business. Instead, provinces must be seen to “conduct and manage” certain types of gaming within their borders.
Bearing the above in mind, there is no cut-and-dried “tax” rate for Ontario’s iGaming market, because the province and the operators are technically, kinda-sorta, partners in the business. Instead, companies hand over a share of revenue to iGaming Ontario (iGO), a government agency that is legally responsible for all online gambling operations.
The cost of doing business in Ontario’s iGaming market is reportedly somewhere in the range of 20% of an operator’s revenue. But there are some deductions that operators can make to their revenue, similar to what’s done in the U.S., where several states allow companies to deduct free bets and other promotions from their taxable receipts.
"In Ontario, you've got a very solid tax rate at around 20%," said Jay Snowden, chief executive officer of theScore Bet-owner PENN Entertainment, Inc., during an August 4 earnings call. "You get some deductions on that, so call it high teens, and that's for both online sports betting and online casino."
Getting a handle on the situation
Yet the numbers observers will likely be more interested in will have to do with the total amount of wagering and revenue being done and generated in Ontario. And that aspect of the market is a bit more of a guessing game.
Analysts at industry-intelligence firm VIXIO GamblingCompliance predicted Ontario’s iGaming market would crank out gross revenue of $989 million in its first year of operation, which would increase to $1.86 billion by 2026. If that revenue was the result of a 10% win rate by operators, which is a decent haul for an online sportsbook, that would mean there would be a total gaming handle of around $10 billion in Ontario.
However, the handle in that instance would include both online casino gambling and online sports betting. To compare, New Jersey bookmakers reported a handle of nearly $11 billion in 2021 from sports betting alone.
Still, some further insight into the size of the Ontario market was recently provided by PointsBet, which is live and taking bets in the province. According to the bookmaker's latest financial results, PointsBet handled approximately $14 million in sports bets in Ontario during the three months ended June 30.
Guesstimating the market
PointsBet has put considerable money and energy into its Ontario launch, which happened on the first day of the iGaming market in April. That said, the operator is unlikely to be the leader in terms of handle in the province, as Ontario had a robust “grey market” for online gambling long before the regulated one was up and running.
Notably, an April 20 report from Morgan Stanley analysts showed downloads of PointsBet's app made up just 3% of total downloads in Canada during the month among sports betting and iGaming operators. TheScore Bet and formerly "grey" operator bet365 registered far more interest, with a 35% and 27% share of downloads, respectively.
In other words, PointsBet reported around $4.5 million in monthly sports-betting handle in Ontario from April to June, but that is likely just a fraction of the total wagering in the province during that time. Bet365 is likely one of the biggest in terms of handle, but it is privately owned, so deeper insight into its market position could be hard to come by.
“I think as it relates to the grey market in Ontario, clearly, the bet365’s of the world have been at it for a long time, and we've really been focused on bringing new people into the ecosystem and then conversion of media — theScore media followers into sports bettors,” Penn’s Snowden said earlier this month, according to a transcript.
At least one other company is projecting a decent slice of the market for itself.
The CEO of DraftKings, Jason Robins, said during an August 5 earnings call that their launch in Ontario, which happened in mid-May, was going about as expected. And part of what the Boston-based company was expecting was a bit more of a struggle to gain market share due to preexisting operators.
“We always said that we didn't think we'd be able to achieve quite the same share as we believe we will be able to achieve in the U.S.,” Robins said, according to a transcript.
DraftKings previously offered daily fantasy sports contests in Ontario, before shutting down those operations as the company prepared to launch legal sports betting and iCasino in the province. That earlier DFS business may have helped the operator with attracting customers, but perhaps not as effectively as the "grey" sportsbook operators.
“We have projected 10% to 20% in Ontario as opposed to 20% to 30% in U.S. states," Robins said. "We also always had said pretty consistently that we thought it would be more of a slower grind given the nature of the market where there was just a lot of continuity between the grey market and now versus, I think, U.S. states, which when they open up, it's really more greenfield.”
Some operators are suggesting they’ve done brisk business already. Notably, the CEO of BetMGM has said the online sportsbook and casino registered 70 million transactions during May in Ontario.
The CEO of Entain PLC, which is a 50% owner of BetMGM, said earlier this month that “we are expecting that we are probably in the high single digits somewhere and growing.”
“BetMGM is performing well and we are on track on our expectations,” Jette Nygaard-Andersen said, according to a transcript. “Actives are good, customer conversion, good retention.”
So what did we learn?
IGaming Ontario is not required to report revenue and handle figures monthly, obviously, or it would have done so already. It does, however, have to prepare and file an annual report that will be available to the public.
In the meantime, iGO is also subject to the scrutiny of Ontario’s auditor general, an independent watchdog. The auditor revealed earlier this year that iGO is expected to generate net income of $75 million over three years.
That estimate left some observers underwhelmed. In time, though, more official figures from iGO could provide a more accurate picture of the size of the province’s iGaming market. And maybe even soon, perhaps.