An unclear Ontario sports betting regulation appears to ban sports betting companies that allow bettors to wager on platforms that look like financial exchanges. Point 12 of Section 4.34 of Ontario’s Standards for Internet Gaming states:
Bets which mimic the structure of financial instruments, products, or markets are prohibited.
However, this line was a false alarm. According to Sporttrade CEO, Alex Kane, his Ontario contacts confirmed that this regulation doesn’t prohibit companies like Sporttrade. Under Ontario law, betting exchanges are legal forms of sports betting.
Sporttrade has no plans to launch in Ontario. Its strategic focus remains on the United States. What Ontario wants to avoid is a crossover between speculative investments and bets in the gambling industry.
What Ontario Sports Betting Regulation Targets For Financial Exchanges
Sporttrade is a sports betting startup that allows bettors to trade sports wagers like stocks on a stock exchange. Every bet is between $1 and $99. If a bettor’s wager wins, then that bettor wins $100. If a bet loses, then bettors get nothing. It’s similar to trading on the stock exchange, only bettors are gambling instead of investing.
At a glance, Ontario’s regulation appears to ban companies like Sporttrade because of its similarity to a financial exchange. But Sporttrade is under no such ban. The types of betting that Ontario prohibits are bets like some found in the United Kingdom.
“You could list something like, ‘Will Tesla close above or below $1,304.99 today?’” Kane said. “And while it may look very similar to Sporttrade and you could even make it look like a sportsbook, they don’t want you betting on financial products because that’s regulated in a different way.”
Making a bet similar to the one Kane described would be similar to trading an options contract. Specifically, binary options are types of derivatives that lend themselves to yes or no questions like the ones posed above. If financial traders want to make a yes or no bet on the stock market, options are one of the primary ways they do it.
Another example of what Ontario wants to prevent is a gambling platform offering bets on the price of assets like Bitcoin or gold. A wager on Bitcoin’s price change is the same type of investment made on currency exchange markets. Similarly, bets on gold prices are among the types of investments made in commodities trading.
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Keeping Investing And Gambling Separate
Ontario’s goal is to keep its investing and gambling industries separate. One of the main differences between even speculative investments and gambling is that a speculative gambler can build their own “house advantage.” There are no house advantages against investors when they open a Merrill Lynch account. Merrill Lynch doesn’t close accounts because they make too much money.
In contrast, gambling platforms come with a house advantage. In casino games, casinos stack the odds in their favor. So in the long run, the casino wins money even if individual gamblers have individual wins.
While some sports bettors can beat the house edge, they can have their accounts limited if they beat the sportsbook too much. So, even this special case within gambling is clearly gambling.
Investing and gambling can be regulated so differently because of these key differences. They’re subject to different regulations and taxed differently. By keeping gambling platforms from offering bets that mirror speculative investments, Ontario maintains the integrity of both industries.
So, despite the regulation’s confusing language, Sporttrade and other startups that allow bettors to place sports wagers in a format that resembles financial markets are legal. They just can’t offer bets that are similar to speculative investments in the investing industry.