On October 4th, 2022, the Alcohol and Gaming Commission of Ontario (AGCO) announced that its Registrar’s Standards would be updated to end the transition period for unregulated operators and suppliers. This article will break down what these changes mean, and it will help you understand how your business may be affected.
Ending the Transition Period for Unregulated Operators and Suppliers
One of the AGCO’s main objectives in the past year has been to allow igaming operators and their related suppliers to move into the regulated market as quickly as possible, while minimizing disruptions to Ontario customers. Two requirements must be met for igaming operations to be legal in Ontario:
- They must be registered with the AGCO.
- They must execute an operating agreement with iGaming Ontario (iGO).
Applications to register to the AGCO opened in September 2021. In their application guide, they advised operators and suppliers that if they continued to work in the unregulated Ontario market after April 4th, 2022 and if they did not apply to the regulated Ontario market before April 4th, 2022, their chances of being approved for registration could be adversely affected.
The AGCO has now released this new standard, which came into effect on October 31th, 2022. It reads:
1.22 Operators and gaming-related suppliers must cease all unregulated activities if, to carry out those same activities in iGaming Ontario’s regulated online lottery scheme, it would require registration under the Gaming Control Act.
Operators and gaming-related suppliers shall not enter into any agreements or arrangements with any unregistered person who is providing them with any goods or services if: (a) they are to provide those goods and services in iGaming Ontario’s regulated online lottery scheme, and (b) it would require registration under the Gaming Control Act.
The success of the Ontario igaming market is in part due to the business-focused approach taken by the AGCO with respect to grey market operators. Not only were they not penalized for previous Ontario grey market activities, but their operators and suppliers were able to continue in the Ontario grey market while going through the registration process. As a consequence, these companies did not suffer any business interruption.
The two groups most adversely affected by this change are (1) operators and suppliers who applied for Ontario registration prior to standard 1.22 being announced and did not meet go-live requirements by October 31th, 2022; and (2) existing operators and suppliers who were considering applying for Ontario registration but had not yet applied.
Moreover, if you were not ready to go-live by October 31th, 2022, you had to cease all activities in Ontario until you were authorized by the AGCO and iGaming Ontario. From an Operator perspective, the path from application to go-live can take months, and a considerable amount of financial resources and personnel resources that would be dedicated to meet go-live requirements.
This new standard was particularly challenging for operators who had nearly completed the go-live process but would not be ready by October 31th, 2022. Being forced to cease all Ontario activities, even for a short period of time, would have deleterious effects on operators’ Ontario igaming businesses. Yet, unfortunately, the AGCO is not providing a grace period to operators in these situations.
For operators and suppliers (especially operators) who were considering applying for Ontario registration but had not yet applied, this new standard provided a major disincentive to them, effectively closing off the regulated Ontario market. Any company applying would have had to deal with an approximately 3-6 month interruption of its existing unregulated Ontario business, which would significantly to reduce the Ontario market share of the operator.
The AGCO made a strategic decision to welcome grey market operators at the beginning of the Ontario regulated market. In that way, they made a strategic decision to close off the remaining grey market. Any grey market operator wishing to enter Ontario’s regulated market would be heavily penalized. Caught in the middle, and suffering the most from the AGCO’s decision, are the operators who had already applied for registration, and had to rush to launch before October 31th, 2022, or face significant business interruption.
If you have any more questions about how these changes could impact your business, feel free to contact us HERE or reach out directly to zack@gmelawyers.com or jack@gmelawyers.com.
