Why The Canadian Online Gambling Model Will Not Work

Ever since British Columbia launched its own online gambling site, other Canadian provinces have been following suit. There are two reasons most often cited by Canadian provinces for justifying their foray into online gambling. Canadians already gamble online so it makes sense for the province to generate revenue from the activity and funnel it into needed social projects. The provincial government operated sites would be better equipped to protect Canadian online casino players from the perils of problem gambling than the “shady” offshore ones. Quebec is even contemplating changes in law that will compel Internet service providers to block the offshore online casinos.

Gambling researchers disagree with the above premises. Robert Williams, a professor at the University of Lethbridge and a researcher at the Alberta Gambling Research Institute, opined that online gambling business would be a net economic loss for a province. He said, “In the end, probably more money is leaving the jurisdiction than before. Exactly the same thing happened with the legalization of casinos in Alberta, so why would [online gambling] be any different?” Williams acknowledged that online gambling will bring in revenue, but pointed out that economies do not work in a vacuum. Citizens have set disposable incomes. The money that they will now spend on online gambling would likely have appeared on the government ledger somewhere else. So the gains in the online gambling sector could come from losses in other sectors. Williams concludes that online gambling will not create wealth, but transfer funds from one entertainment or retail sector to another. It is a bad transfer because of the risk of social harm like underage gambling or gambling addiction.

The big assumption on which Williams’ thesis is based is that Canadian online casino players will not switch from offshore sites to state operated ones. The provincial governments based their calculations on exactly the opposite assumption. The Canadian experience shows that Williams is correct. It is for this reason that Quebec is contemplating blocking offshore sites. Offshore operators offer a product that cannot be matched by the government operators. Offshore online casinos cater to players from all over the world and have greater liquidity. This allows them to offer better odds, more enticing promotions and more new games.

Canadian provinces should have followed the United Kingdom example. By regulating private online sites, allowing them to offer services and taxing their revenues the desired objectives are met. The government gets money in the coffers, the players get excellent products and the regulator ensures player protection.

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