On May 19, 2021, the Alcohol and Gaming Commission of Ontario (AGCO) made available for comment a discussion paper on the expected eligibility requirements for iGaming operators in Ontario's new iGaming market. The discussion paper on eligibility requirements is available on the AGCO's iGaming Engagement Portal and is available for comment by industry stakeholders until June 14,, 2021.
By way of brief refresher, the Ontario government is in the process of developing a framework and regulatory model for a modern, competitive iGaming market in the province that welcomes private operators of iGaming offerings. The details on the development of the iGaming model, and the multi-phase stakeholder engagement process the AGCO is deploying in connection with the development of the iGaming model, can be found in our March Bulletin: Stakes are High: Ontario Seeks Input on How to Open iGaming Market.
THE ELIGIBILITY REQUIREMENTS
The most recent discussion paper outlines the AGCO's current thinking on the proposed model for determining eligibility requirements for entities that wish to participate in Ontario's iGaming market.
The discussion paper is organized around the following key themes: (1) types of registrations and associated costs; (2) timing; (3) key elements of the application package; and (4) certification of technology and the role of independent testing labs.
1. Types of Registrations and Costs
The discussion paper notes that the AGCO and the Government of Ontario are considering whether existing registration classes can be applied to the iGaming model. Under this approach, the existing registration classes for Operators (i.e., those operating a gaming site) and Gaming Related Suppliers (i.e., those that support the operation of gaming sites through the provision of gaming-related equipment or provide services directly related to the playing of a lottery scheme) would be applied to the internet gaming environment.
Should the AGCO apply existing registration classes to the iGaming space, the discussion paper provides indicative examples of business/service providers that may not require registration (while noting that registration requirements will be assessed by the AGCO on a case-by-case basis). Some of the listed examples of providers that may not require registration are: cloud server services; geo-fencing services; identity verification services; and companies or individuals that provide services not directly related to the playing of lottery schemes, like advisory services related to finances and customer service.
The discussion paper also notes that the AGCO is considering the extent to which employees of registered entities will need to be registered individually, and identifies employee registration requirements as an area in which the AGCO is particularly interested on industry feedback.
As it relates to registration costs, the AGCO notes that if existing registration classes are applied to the iGaming model, the AGCO is considering applying the same fee structure that is currently in place. Under the current fee structure, the annual fee for an operator is C$100,000 per gaming site, the annual fee for a Gaming Related Supplier that manufactures gaming equipment is C$15,000 and the annual fee for Gaming Related Suppliers that supply services is C$3,000.
The registration fees outlined above are stand alone fees for being registered only and are not a replacement for the contemplated revenue sharing arrangements with the government. As discussed in our March bulletin, the exact revenue model for the iGaming framework remains under review and development by the Ontario Government, and was the subject of a consultation and engagement process earlier this year.
The AGCO notes that it expects to start accepting applications for Operators and Gaming Related Suppliers (assuming the existing categories are used in connection with iGaming) in early September 2021. Before then, the AGCO expects to publish a detailed overview of the application process as well as hold interactive education sessions with interested parties to ensure the application process is accessible.
As to how long the application process itself will take, the discussion paper states that operational and regulatory experience, and a strong track record of compliance in other jurisdictions, may expedite the timing for processing an application. Unsurprisingly, the process may take longer where the AGCO determines that an application requires further analysis or additional investigation. In situations where additional investigation or analysis is warranted, applicants may be required to cover reasonable investigatory and diligence costs.
3. Key Elements of the Application
The scope and degree of expected informational disclosure
described in the discussion paper in connection with the
registration process is largely consistent with that required of
existing land-based registrations with some modifications for the
digital space. The AGCO discussion paper notes that financial
investigations and one-on-one interviews may be required on a
case-by-case basis, but that the goal is to arrive at a
registration model that is as efficient as possible while
maintaining Ontario's high regulatory standards.
At the entity level, informational disclosure will likely include:
- Corporate information, organizational structure and list of key personnel
- List of gaming-related suppliers and affiliates that will have a role in an Operator's online offering
- List of brands/websites planned for the Ontario market
- History of licenses/registrations in other jurisdictions including disclosure on compliance history, sanctions and penalties
As to the scope of required diligence, the discussion paper confirms that the current expectation is that the scope of informational disclosure will be similar to that required for Operators and Gaming Related Suppliers under the existing registration classes. This means that information disclosure will likely be required for officers, directors and shareholders holding five per cent or more of an applicant corporation. For key individuals (i.e., directors, officers and individual shareholders above the ownership threshold), required disclosure will include:
- Personal background information
- List of jurisdictions in which the individual holds a gaming-related license/registration or where they have previously provided disclosure to a regulator
- For non-Canadian residents, a criminal background check for the jurisdiction in which they reside
Importantly, the discussion paper notes that applicants for registration will be required to confirm that (a) prior to going live in Ontario's regulated market, the applicant will cease offering gaming products and services that are not regulated by the AGCO to individuals in Ontario and (b) that the applicant will abide by the Registrar's Standards for iGaming. The effect of these confirmations will mean that operators will need to migrate any existing Ontario customers to AGCO-regulated gaming sites and thereafter ensure that they can detect and prevent customers in Ontario from accessing any of the operator's gaming sites that are not regulated by the AGCO.
The draft Registrar's Standards for iGaming were released last month and are covered in our Bulletin: Ontario iGaming on a Roll as Draft Standards Released.
4. Certification of Technology and the Role of Independent Testing Labs
According to the discussion paper, the AGCO will not be directly testing and approving technologies but will instead allow independent testing laboratories (ITLs) to certify products. ITLs must be registered with the AGCO and are permitted to apply to registration now to ensure that ITLs are registered in advance of the anticipated September registration window for operators and suppliers.
In recognition of the fact that technologies may have already been tested in other jurisdictions, ITLs will be permitted to consider prior testing that has been completed.
Exactly which technologies will require certification remains to be determined.
UPCOMING ENGAGEMENT OPPORTUNITIES
As mentioned in our April Bulletin on the draft iGaming standards: Ontario iGaming on a Roll as Draft Standards Released, the AGCO engagement portal indicates that there will be further engagement opportunities in the coming months covering a wide range of topics, including: regulatory compliance; commercial arrangements; data capture and storage and other technical aspects; and the service experience.
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