Industry Spotlight on Gambling: Exploring the Legalization of Sports Gambling in the U.S. and the Impact on Canada

September 12, 2018 9:27 am Published by Leave your thoughts

In 2019, the total gambling gross yield worldwide is forecasted to rise to $495 billion USD continuing the steady increase the industry has experienced since 2001 [1]. While it is difficult to estimate the value of sports betting since many countries lack consistent regulation, it is projected that this growing industry makes up 30 to 40% of the global gaming market, making it an extremely attractive industry for countries to be involved in [2]. While European countries have been operating in the sports gambling market for a while now, other countries such as Canada have decided not to follow their lead. Many Canadians are wondering why Canada has chosen to not explore further into this profitable market and what the future holds for sports gambling in Canada now that the U.S. has decided to change their own rules.

In May 2018, the U.S. government changed the longstanding federal laws surrounding sports gambling making it the responsibility of each individual state to determine whether or not they legalize all sports betting [3]. So far, Nevada, New Jersey, and Delaware have legalized single-game betting and almost 20 other states are trailing closely behind. With these new laws in place, the sports gambling industry is going to shift drastically. According to the American Gaming Association in 2017 “Americans bet an estimated $15 billion on the Super Bowl and NCAA Men’s Basketball Tournament alone, and 97% of those bets were made illegally.” Furthermore, the United States’ illegal underground sports betting market brings in $150 billion annually making the new legal market extremely lucrative [4]. With these new changes, a few looming questions emerge: what impact will these new regulations have on Canada? Is Canada lagging behind in the modernization of gaming laws and, if so, why has Canada not removed the ban on all sports gambling?

Before looking at the impact U.S. policies will have on Canada, it is important to look at the current Canadian laws and why Canadians are not satisfied with them. The laws surrounding sports gambling in Canada is as follows: each provincial government has jurisdiction over their own sports betting laws and certain provinces even have their own “sports lotteries” for residents, however, single-game sports betting is still banned [5]. Instead, Canadians can only make bets on multiple sports games known as parlays, which are less attractive gambling options as they are harder to place bets on and have decreased odds of winning. To put into perspective the difference in the value of betting on provincial sports lotteries versus single-game betting through offshore sportsbooks, according to the Canadian Gaming Association, “Canadians bet an estimated $4 billion annually through offshore sportsbooks. That’s about eight times as much money as they wager through provincial sports lotteries” [6].

With the higher rewards associated with single-game bets, it is no wonder that Canadians are turning to offshore options instead of putting their money into the Canadian sports gaming industry. Consequently, there will be increasing risk and competition for Canada as the U.S. moves towards legalizing sports gambling. Canadian casinos, as well as provincial lotteries, will face pressure with the legalization of sports gambling in the U.S. as more desirable gambling options become available. Canada is not only in danger of losing customers to the U.S. gambling markets, but also risks losing business as there are many sponsorship opportunities that come from major sports events that will now be more attractive in the U.S. The U.S. has already begun taking advantage of these opportunities with the NBA recently signing a deal with sportsbook operator, MGM, making it the first major U.S. sports league partnership.

The impact the legalization of sports gambling in the U.S. could have on the Canadian market raises an important question: why is Canada choosing not to follow in the U.S’ footsteps and legalize single-game betting? Although attempts were made in 2012 and again in 2016 to pass a bill legalizing single-game betting, neither made it past the Canadian Senate [7]. By not passing either bill and continuing to leave the sports gambling market unregulated, Canada is losing a tremendous amount of money to offshore sports books, which could otherwise be translated back to taxpayers. Not only that, but many Canadians feel that legalizing sports gambling could lead to an increase in jobs, help combat organized crime, and become a massive revenue stream to provincial economies in Canada.

On the other hand, other people feel that passing a bill would not fix the illegal wagering problem that currently exists in Canada and that instead, it would lead to more gambling issues in the country. Canada would then need to invest in programs and resources to promote healthy gambling and to ensure that underage gambling is being prevented. It could also pose problems for athletes and professional sports leagues as it would incentivize bribes and fixed matches.

With that being said, according to an Ipsos poll conducted on behalf of the Canadian Gaming Association, 63% of Canadians would adopt the pro-legalization position and believe that single-game sports betting should be made legal and regulated [6]. With 82.9% of adults in Ontario admitting to having gambled at least once annually in a 2013 study, and with young people ages 18-24 having the highest weekly participation rates in sports betting, the Canadian government may be hurting the country by operating in this unregulated sports gambling grey area [8]. With the recently changed laws in the U.S. regarding sports gambling, it will be interesting to see if Canada will follow their lead in the near future if this change in policy results in a positive outcome. With the few arguments against legalizing single-game betting and the seemingly many positive reasons to support legalization, it might be time for Canada to modify their regulations, take advantage of the many revenue opportunities associated with single-game betting, and modernize Canadian sports betting once and for all.










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This post was written by Sara Kernerman, Assistant Analyst, Consulting

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