Late last week, the Canadian federal government introduced a bill (C-218) to the House of Commons that, if passed by both House and Senate, would legalize single-game sports wagering within the country’s 10 provinces and three territories. The need for tax revenue in a post-pandemic world has legislators seemingly ready to amend a Criminal Code that has reduced legalized sports betting within the country to parlay-style wagering or offshore books.
Should the bill turn into law as expected, it has been suggested that a regulated Canadian online gaming market could be worth anywhere between $3.8 billion and $5.4 billion in annual gross gaming revenue. DraftKings and FanDuel—the U.S. market leaders—are both expected to pursue licensure. But unlike within the U.S., the two daily fantasy sports operators would likely be playing catchup in Canada. Canadians can legally bet offshore, so DFS isn’t nearly the behemoth there that it was here prior to PASPA being struck down; the Canadian daily fantasy market is also more fragmented than its U.S. counterpart (Rogers Corp., Yahoo Sports and TSN all maintain a piece of the pie). Instead, Scott Burton, the CEO of FansUnite Entertainment (CSE: FANS), a publicly traded Canadian sports betting technology company, and gaming sector executive Robert Davidman agreed that Bell Media, Rogers Corp. and theScore are the companies best positioned to take market share if/when the proposed bill becomes Canadian law in 2021.
Our Take: Canadians wager roughly $500 million a year on parlays through the provincial lottery system. But with single-game sports betting outlawed and offshore wagering legal (go figure), “all the tax revenue that could potentially go into provincial coffers is gone out the door,” Davidman explained. It has been estimated that Canadians bet $4 billion a year with offshore books. “[The Canadian government] is better off making [sports betting] legal and keeping that money in Canada,” he added.
The concept of amending the Criminal Code to permit single-game sports betting has been brought up—and rejected—several times over the last decade, so Canadian sports bettors aren’t counting their winnings just yet. But Davidman said he’s sensing things are different this time around: “Most of the gaming [tax] revenue that was being generated was from people going to the casinos. Well, right now they can’t go; the casinos are shut down [because of COVID-19]. And when you have a government that looks south and sees a state like New Jersey making all this money—and you have all of these [tax] dollars being lost because businesses can’t operate—it just makes a lot of sense.” For what it’s worth, Ontario—Canada’s largest province—is comparable population-wise to the Garden State. New Jersey has raked in roughly $75 million in tax revenue since its Q2 2018 launch.
Tax revenues aside, there are benefits to Canadian legislators passing a single-game sports betting amendment. Davidman explained that the development of a robust sports betting ecosystem will bring “companies in [to Canada] who spend money on marketing [and a host of other services], and all of that work drives job creation. [Legalized single-game sports betting] will increase revenues across the board for a lot of businesses—not just those in the gaming sector.”
Once the federal government alters the Criminal Code and provinces open up licensure to outside operators (think: state licensing), Score Media & Gaming (a component within the JohnWallStreet Sports Stock Index, TSCRF is up +90% since news of the bill broke) is one company well positioned to capitalize on the opportunity. As Burton noted, theScore has “done a great job digitally attracting sports fans [in Canada]” and should be able to convert some of those individuals into legal sports bettors. Rogers Corp. (owner of Sportsnet) and Bell Media (owner of TSN) should also be at an advantage, considering they control the bulk of NHL, NBA and MLB broadcast rights in the country. Just look at the success SkyBet has had in the U.K. as a result of its ownership over EPL rights. Rogers and Bell also have DFS databases they can use to market to.
The Canadian sports betting market is comparable in size to the most heavily populated of states. “If California were to legislate and be open, Canada would generate revenues comparable to what we would see in [the Golden State],” Davidman said. There are roughly 35 million people in Canada and 40 million in California. And like Americans, Canadians are gamblers. In fact, Canada is among “the top five in most valuable, per-player, in the world,” he added.