The following Financial Post article highlights that many of the Jaswal Institute’s predictions regarding regulatory developments, stakeholder impact and stakeholder challenges in the online gaming space are coming to fruition.
Please see the Financial Post article, highlighted below, and our detailed analysis and predictions made earlier in the year for more information.
Internet service providers, First Nations gird for fight over Quebec’s gambling law – Sean Craig and Damon van der Linde, Financial Post
TORONTO/MONTREAL — The country’s major Internet service providers, a Quebec First Nations group and potentially the federal government are lining up against Quebec legislation that will lead to the blocking of gambling websites chosen by the government agency Loto-Québec.
Under Bill 74, the new law passed last month in Quebec’s National Assembly, Loto-Québec can ask Vidéotron, Bell Canada, Cogeco Inc., Rogers Communications Inc. and other ISPs to block the sites of the agency’s competitors or face fines of up to $100,000 per infraction. Loto-Québec launched its own online gambling service, Espacejeux, in 2010.
Quebec’s new law doesn’t specify how ISPs should block websites, but the Canadian Wireless Telecommunications Association says its membership — which includes Vidéotron, Rogers, Bell and Telus — opposes the legislation in part because it would require expensive new infrastructure.
“It’s extremely costly and challenging technically from a wireless standpoint,” Kurt Eby, CWTA’s Director of Government Relations, said in an interview. “Our three largest members are national in scope and many others are multi-provincial. Their networks are designed as a complete network, so they don’t have the means to block content at a provincial level. Even for what this law is asking for to be feasible, it would cost millions of dollars and take months of engineering.”
“The bill sets a precedent that we haven’t seen, with the government using ISPs to block competitors against its own interests,” Eby added. “We’re talking about gambling today, but who knows what we’re talking about tomorrow.”
The Kahnawake Gaming Commission, located on the south shore of Montreal in the Mohawk Territory of Kahnawake, says Bill 74 would cost the community of 8,000 a substantial amount of its revenue — possibly millions of dollars.
“It’s an attack on the revenues of a community-owned and operated gaming site where all the benefit goes back to the community,” Gina Deer, the Mohawk Council of Kahnawake’s Gaming Portfolio Chief, said in an interview.
The Kahnawake Gaming Commission’s website says it licenses and regulates 25 operators and more than 90 websites from around the world. The Commission hosts online casinos on the Mohawk Internet Technology servers, including the First Nation’s own site, Mohawk Online.
Deer said blocking the sites would be a violation of the UN Declaration on the Rights of Indigenous People because it would hurt the community’s economic development.
“It seems that whatever we do in the way of economic development, they create laws and deem it illegal,” she said, referring to disputes with the provincial government over First Nations’ rights to produce and sell tobacco. Because the community has been allowed to operate outside federal gambling regulations under the Kahnawake Gaming Law of 1996, Deer said the province should also respect their existing rights.
Deer said it’s too early to take legal action, but the Council wants to meet with both the federal and provincial governments to come to a solution that will not hurt the Kahnawake community.
“We’d like to see a political solution rather than a criminal one,” she said. “This government needs to sit down and take the time to learn what we’re doing here rather than judging us from afar.”
The legislation has the support of Montreal-based Amaya Inc., the largest publicly traded online gambling company in the world, and a licensed partner of Loto-Québec, providing it with both online and land-based games and support services.
Amaya spokesman Eric Hollreiser wrote on the company’s Pokerstar blog that it would “happily expand its existing partnership with Loto-Québec.” Amaya currently provides online gaming software to Espacejeux, and has been in negotiations for an expanded relationship with Loto-Québec since 2014.
Amaya owns the Isle of Man-based Pokerstars and the Ireland-based (and Isle of Man and Malta-licensed) Full Tilt Poker, two of the Internet’s largest poker rooms.
Loto-Québec said Espacejeux has 20 per cent of the Quebec gambling market, which it estimated at $250 million in 2014. Quebec Finance Minister Carlos Leitao said recently he expects website blocking will boost Espacejeux’s annual revenue by $13.5 million in the first year and $27 million in years after that.
Calvin Ayre is the Lloydminster, Sask.-born founder of the Bodog sports betting and casino-game operations. In 2012, he was indicted in the U.S. for conducting an illegal sports gambling business and conspiring to commit money laundering.
Ayre, who now runs an online gambling industry news site, says he believes there will be a number of legal challenges, though these will not come from the casinos themselves.
“This is a horrible, protectionist law that might violate Canadian trade agreements, but for sure violates the principles of net neutrality,” he said.
“The law is designed to prop up a flawed online gambling business model and consumers will suffer because it stifles competition … all qualified companies should be granted licenses and then let the market decide winners and losers.”
Michael Geist, the Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, called Bill 74 “a bad law”.
“Costs will be passed on to consumers. And higher Internet costs are not the right policy to pursue at a time when we should be trying to make the Internet more accessible,” he said in an interview.
“The motivation, that was clear from the beginning,” he said. “Officially licensed gaming services haven’t performed the way Loto-Québec hoped. They’re trying to block out the competition.”
Geist said challenges to the law may come from outside the gambling industry. While lotteries and gambling in Canada are governed provincially, telecommunications are regulated at the federal level.
“Practically speaking, this is really about regulating telecoms, and the Supreme Court has made clear that’s not provincial business,” Geist said. He believes that one or more ISPs could take legal action, and might be joined by the federal government.
Geist also said the law violates the Charter of Rights and Freedoms, and that free speech challenges could be made in court if other legal measures are unsuccessful: “A person’s ability to access all content on the Internet without censorship or favouritism is a fundamental principle of net neutrality and this clearly violates that.”
Ottawa is also watching the legislation.
“The Government of Canada supports an Open Internet where Canadians have the power to freely innovate, communicate and access the content of their choice in accordance to Canadian laws,” Navdeep Bains, the Minister of Science and Innovation, said in an emailed statement Thursday. “We are aware of the legislation in question and we are monitoring its implementation closely.”
Financial Post article authored by Sean Craig and Damon van der Linde
Authored by Johnny Jaswal, Managing Director of the Jaswal Institute. The Jaswal Institute is a law firm that provides exceptional legal services, government relations services and a full range of related investment banking advisory services. If you require further information, please contact Johnny Jaswal.