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Emily D. Swoboda

Will Canada Regulate?

15 November 2006

U.K. Culture Secretary Tessa Jowell in October hosted the first ever government-sponsored international remote gambling summit, pushing for a unified regulated Net gaming industry. While both the Canadian and the U.S. federal governments were invited to participate; both were absent. Now, according to a report in the Toronto Star, Canada may be under pressure to align itself with countries leaning toward regulation as its southern neighbor outlaws it.

While Canada's federal government was a no-show, a representative from the Quebec provincial government was reportedly in attendance, although IGN was unable to confirm the identity of the person.

The general sentiment concerning Canada's relationship with I-gaming regulation is that it just may not be a priority. But Cheryl Giblon, global sales and marketing director for Calgary-based eNation Corporation, feels that the setback lies in the wording of the Canadian Criminal Code.

"It's not entirely clear what the Canadian government position is regarding Internet gaming because the regulations were developed under the Criminal Code before the technology existed," Giblon said. "It's not clear if the Criminal Code covers Internet gaming or not. Many believe that it doesn't."

In 1996, Dennis Mills, who was a federal MP from Toronto at the time, introduced a private members bill to allow Internet gaming in a regulated environment; however, it didn't pass, according to Giblon, because there was a federal election in 1997.

"The Criminal Code is unclear because it was put together before the Internet existed, and the closest we came to clarity was Dennis Mills in 1996," Giblon reiterated.

But gaming lawyer Michael Lipton of the Toronto-based firm Elkind & Lipton LLP said the Criminal Code clearly addresses I-gaming in Section 207(4), which reads:

In this section, "lottery scheme" means a game or any proposal, scheme, plan, means, device, contrivance or operation described in any of paragraphs 206(1)(a) to (g), whether or not it involves betting, pool selling or a pool system of betting other than…for the purposes of paragraphs (1)(b) to (f), a game or proposal, scheme, plan, means, device, contrivance or operation described in any of paragraphs 206(1)(a) to (g) that is operated on or through a computer, video device or slot machine, within the meaning of subsection 198(3), or a dice game.

Lipton said the problem lies in a general passivity toward regulating online gambling.

"The stakeholders in Canada--the governments, the lotteries, the software manufacturers . . . I'm not sure that any of them are proclaiming that there probably should be regulation in Canada," Lipton said. "That's not to say that they don't want it or that it's not a good thing, but certainly I think the position of Canada in relation to the conference hosted by Tessa Jowell is generally reflective of the governments' attitude toward I-gaming -- and that is that they're very passive about it. They don't seem to really want to get into taking a firm position in regard to whether or not it should or should not be regulated."

Just before the 1988 Calgary Olympics, the Canadian federal government gave up the ability to conduct and manage gaming operations, but it is still a matter that falls within the criminal law jurisdiction of the government (i.e. the federal government has exclusive jurisdiction over criminal law). When the federal government gave up the power to control gaming, it stipulated that lottery schemes can be conducted and managed only by the provincial governments or by its lawful agents.

Lipton's view is that the regulation of I-gaming has to spring from provincial governments because they're the jurisdictions in Canada that can regulate and operate online gaming.

"Ontario, for example is not anxious to expand gaming, especially with a political election coming up next year," Lipton said. "Other jurisdictions are slowly embracing it and I don't think that they have come together to determine whether there should be a national type of regulatory scheme. Clearly, if there is going to be a national regulatory scheme, it has to come from the provinces which have the ability to conduct and manage a lottery scheme. So, they have to come together and form some kind of an agreement amongst all of them much like they have done with the Interprovincial Lottery Corporation."

The Alexander First Nation and Kahnawake Indian nations in Canada have, through treaties, constitutionally protected aboriginal rights to regulate and facilitate gaming within their territory.

Paul De Zara, sr. director of communications for Ontario Government Services Minister Gerry Phillips, said Ontario has not addressed commingling with other provinces to formulate national regulations.

"We haven't had discussions with our counterparts, so it would be premature for me to say that," De Zara said. "Basically, it's a federal government law; the federal government needs to address this. There is gaming in all 10 provinces in some form or another, so I'm sure that the provinces would be heavily consulted going forward. But the decision rests with the federal government here."

Phillips introduced a bill in October to ban gambling Web sites from advertising in Ontario. The omnibus bill contains amendments as well as new enactments for a number of different areas, all of which fall under the general prescript of consumer legislation. Phillips aims to amend the Consumer Protection Act of 2002 to criminalize in Ontario the advertisement of Internet gambling businesses.

"As online gaming relates to the province of Ontario, all we can do is from a consumer protection side of things," De Zara said. "So, we're very limited in what we can do and that's what the online advertising ban is for us; it's consumer protection measures. And all we're doing in our bill is just outlawing an already illegal activity. That's about as much as we can do. We know it's very limited. It doesn't tackle the issue on a larger scale, but it does address it in some small measure and we can help to protect legitimate businesses in Ontario."

Giblon said there is some question about the way Phillips' bill has been proposed.

"There is some contention that they're trying to act on behalf of the Criminal Code, which isn't allowed," She said. "It's not certain that this thing would actually pass. I am not a lawyer, but the Criminal Code is pretty clear on saying you cannot just go around it at a provincial level."

Phillips wrote a letter at the end of September to Canadian Federal Justice Minister Vic Toews on the matter of Internet gambling and regulation, asking him to take a look at it, but there has been no movement yet, De Zara said. He wrote:

…It is clear, however, that illegal Internet gaming presents complex regulatory challenges requiring a coordinated effort by provinces and the federal government on several fronts. I take this opportunity to seek your assistance in two federal areas.

I would ask for your support and continued engagement on this issue. It was clear from our spring stakeholder meetings that attendees considered a review of the gaming provisions of the Code an important part of any inter-governmental strategy. I welcome your views on how the Code could best address unregulated Inter'net gaming and whether the federal government is prepared to review the Code - specifically in relation to Internet gaming. Such a review could include an assessment of appropriate penalties and other deterrents, ensuring the right set of enforcement mechanisms are in place, and exploring opportunities to enhance public education related to specific prohibitions. Should you decide to proceed with a review, I would be interested in discussion how Ontario could participate.

"Is there any pressure on Canada to regulate Internet gambling? I'm not sure that there really is," Lipton concluded. "Should there be? Sure there should, because this is an industry that cries out for regulation. But when I say regulation, they regulate land-based gaming and they sure as hell should regulate Internet-based gaming."

Will Canada Regulate? is republished from
Emily D. Swoboda
Emily D. Swoboda