The Options for Internet Gambling in Canada

Abstract

Globally, online gambling is now at least a $15.5 billion a year market (James 2006). Currently, there are around 2,000 online gambling sites around the world, many of which are operating in small countries such as Antigua and Barbuda (537 sites) and Costa Rica (474 sites) (BBC 2007). Estimates suggest that U.S. residents spend more money on online gambling than any other public, supplying more than half of all revenues while increasing their activity at a rate of more than 20 percent per year (Stewart 2006, 1-2). On the other hand, a relatively small number of Canadians are thought to gamble online. One survey of Ontario adults suggested that 5.3 percent had gambled on the Internet in a given year (MacKay 2004, 7). Other national research suggests a much lower figure--less than 1 percent (MacKay 2004, 7). In any event, some Canadians do gamble online, and while some do so legally through province-sponsored sites, others do so through sites that exist in unclear legal terrain. As online gambling has grown, national governments have developed different ways to handle it. The United Kingdom has taken a regulation-and-taxation approach: Parliament passed the Gambling Act in 2005, to be fully implemented by September 2007, which allows online gambling sites to operate inside the U.K. while being regulated and taxed by the government (Dept. for Culture, Media and Sport). In the United States, the federal government has taken nearly the opposite approach. Recently, it has tried to eliminate online gambling indirectly by making illegal the use of U.S. credit card accounts for online gambling payment mechanisms (Stewart 2006, 5). Traditionally, it has also interpreted the 1961 Wire Act as banning online gambling, although contrasting interpretations of the law exist (Stewart 2006, 7). Canada, however, so far has chosen not to move policy in either the U.S. or U.K. direction. As Terri L. MacKay of the Addictions Foundation of Manitoba puts it, in Canada online gambling waits in legal purgatory. This paper aims to offer a way out of purgatory for online gambling in Canada. We begin with an examination of the status of online gambling in Canada. This is followed by an analysis of the two most prominent and contrasting options for regulating online gambling, using as exemplars the U.S. and U.K. approaches. (1) We conclude with a call for Canada to recognize the growing trend of online gambling and the need to develop policy to address it. Canadian Policy Before 1969, the Criminal Code of Canada banned all forms of gambling other than charity lotteries, lotteries at fairs, and pari-mutuel betting on horse races (Seelig and Seelig 1996). In 1969, the Code was amended to allow the federal and provincial governments to hold lotteries, but in 1985 the federal government left gambling entirely to the provinces in exchange for a payment of $ 100 million (Seelig and Seelig 1996). Every province in Canada now has a lottery, and there are dozens of casinos in Canada. It remains somewhat unclear whether the Criminal Code of Canada bans Internet gambling other than that provided by provincial corporations. The Code makes it illegal to run or to be found in a betting house, but it does not state whether a virtual betting house falls under the ban. The Code permits the provinces to allow myriad forms of gambling, including, including lottery schemes, and section 207 defines schemes to include those operated on or through a computer. The Atlantic provinces as well as British Columbia have taken advantage of section 207 to offer limited online gambling, although participants must be residents of the province and within its borders at the time of purchase in order to buy tickets legally. (2) Elsewhere in Canada, the Kahnawake Mohawk Nation in Quebec has been leasing server space to Internet gambling operations since 1999, which makes a $2 million profit per year for them (Beazley 2007). …