However, Ontario is intending to open the market to private operators in early 2022 in a process managed by the iGaming Ontario subsidiary of the Alcohol and Gaming Commission of Ontario. In the annual Auditor General’s report released on December 1, Lysyk noted that proposed model could create some legal problems down the road as it could ultimately see a lot of power and risk bestowed upon private-sector operators in the market.

“As a result, there is legal risk with respect to whether iGaming Ontario meets the ‘conduct and manage’ threshold set out in the Criminal Code,” the report stated. “Consideration for whether a province has illegally delegated the ‘conduct and manage’ function in a gaming scheme to a private entity has been the subject of past legal challenges in Canada. We conclude that iGaming Ontario’s business model could be subject to legal challenges.”

Lysyk recommended the provincial government “take appropriate steps to ensure compliance with the Criminal Code” before the launch of its planned iGaming market, expected to be in the first quarter of 2022. She also raised concerns about the governance structure of iGaming Ontario and about how the entity plans to ensure the integrity of games, writing that the AGCO holding regulatory responsibilities over both iGaming and iGaming Ontario’s lottery schemes creates “inherent conflict” between iGaming Ontario’s goal of generating profit-based revenue for the province and the AGCO’s goal of effectively administering regulatory oversight of the gaming sector.

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The auditor added there is “limited public information” about the specific steps iGaming Ontario will take to ensure the integrity of games offered by private-sector operators, noting that those key responsibilities have been entrusted to the private sector.

Lysyk recommended removing the governance and operating responsibilities for iGaming Ontario from the AGCO and potentially transferring iGaming Ontario’s reporting relationship to the Ministry of Finance.

“The government will take any additional steps it considers necessary to address any legal risks associated with the proposed framework for Internet gaming in Ontario,” the government said in response to Lysyk’s recommendation. “Given the approach taken to date, and that any risks associated with a conflict of interest between the functions of the AGCO and iGaming Ontario have been addressed through the structure and requirement for supplementary policies, the benefits of maintaining the status quo outweigh the operational risks and fiscal impacts of establishing a new reporting structure for iGaming Ontario.”

The government also noted the AGCO has developed integrity standards for the iGaming market, including that all games have to be tested and certified by an independent lab, and has set up an iGaming Compliance Unit.