Cannabis and single-event sports betting have a lot in common in Canada. Each were popular and easy to access long before Ottawa granted legalization in a bid to channel revenue into government coffers. Each are now age-restricted and heavily-regulated due to public health concerns. And each caused related stocks to surge amid lofty projections for a robust post-legalization market.
Dale Hooper, the newly-minted general manager of FanDuel Canada, is in a position to draw such comparisons, and also note the contrasts. He joined the New York-based betting and fantasy sports firm last month, after more than two years advising Canadian pot companies on regulatory matters. His resume also includes a stint as chief brand officer at telecom and media giant Rogers Communications (RCI-B.TO), where he and his team created Hometown Hockey, a travelling three-day festival and NHL broadcast that brings big league excitement to smaller communities.
Just a few weeks into his new role, Hooper, and his peers at rival sportsbooks, are waiting for Ontario to drop the puck for private-sector operators to start taking bets. Currently, province-owned PROLINE+ is the only legal option for Ontarians to wager on single events.
The dawn of one of the largest online gambling markets in North America was expected in Ontario before the end of December. Now, some companies are publicly stating that they expect to remain on the sidelines until early next year. Timing isn’t the only uncertainty. Ontario’s government has yet to spell out the rate at which the industry will be taxed. It also remains to be seen if or when other regions in Canada will follow Ontario’s lead to allow private competition.
With key details unsettled, Hooper is certain about one thing. Canada’s burgeoning gaming industry will avoid much of the chaos seen in the cannabis sector, where lacklustre financial performance and abrupt executive departures are the norm more than three years after recreational pot was made legal.
“A lot of the growing pains that the cannabis industry in Canada has endured are because the industry is still being invented, the space had to grow up from nothing,” Hooper told Yahoo Finance Canada in an interview. “The sports betting industry is global already. We’re bringing the best of the world to Canada.”
Ontario has lured some of the biggest players in online gaming since Ottawa granted the provinces authority to regulate new forms of betting this summer.
In August, U.S. gambling firm Penn National Gaming (PENN) announced a deal to acquire Toronto-based Score Media and Gaming (SCR.TO). Australian online bookmaker PointsBet Holdings (PBH.AX) is building out a Canadian team in Toronto, led by a former Rogers strategist. Others, including FanDuel’s chief rival DraftKings (DKNG), have expressed interest in Canada’s most populous province.
FanDuel is among the collection of betting brands owned by Flutter Entertainment (FLTR.L). Based in Dublin, Ireland, the company became one of the world’s largest online betting groups following a US$6 billion merger with Toronto-based Stars Group in 2019.
It's on a roll in the U.S. market. The company accounted for 42 per cent of U.S. sports wagers in June, according to research cited by Bloomberg. That’s up 35 per cent from the two months prior, and well ahead of its nearest competitor DraftKings, at 23 per cent of the market.
FanDuel is currently taking bets in 11 U.S. states, each of which has its own regulations and rules. That, plus Flutter’s international regulatory experience, gives Hooper confidence in the company’s ability to adapt to whatever Ontario lawmakers throw his way.
“We know what’s going on around the globe. So we’re ready wherever it goes,” he said. “There’s nothing that I’m worried about happening.”
Hooper declined to hazard a guess on the rate at which Ontario will tax sportsbook revenue. His counterpart at Australian PointsBet’s new Canadian division, Scott Vanderwel, told Yahoo Finance Canada in September that the industry is expecting something “in the 20 per cent range.” A recent report from the research firm Vixio GamblingCompliance backs up Vanderwel’s projection, calling for an effective tax rate between 18 to 20 per cent.
The Vixio report calls for Ontario’s online gambling market to generate $989 million in gross revenue in its first year, before hitting $1.86 billion by 2026. Those figures assume a launch in late 2021 or early 2022, a full range of products, and an effective tax rate of 20 per cent.
To compare, Ontario cannabis retailers generated $217 million in sales in the first year following legalization in October 2018, according to Statistics Canada.
The Ontario Cannabis Store, which oversees pot sales in the province, said in a report this summer that $840.1 million worth of cannabis was sold legally in the province between April 1, 2020 and March 31, 2021.
Stumbles were plentiful in Ontario’s first year of legal pot. Upon taking office in March 2018, Premier Doug Ford elected to scrap his predecessor’s government-controlled retail model, which was similar to the Liquor Control Board of Ontario (LCBO), in favour of privately run physical stores.
On the first day stores were allowed to open, Toronto, a city of nearly three million people, saw long lines form at the single shop that was ready to serve customers. Canadian pot executives routinely blamed the lack of retail stores in Ontario for the sector’s poor financial performance on quarterly conference calls at the time.
Hooper expects the launch of private sportsbooks will run more smoothly. His takeaways from the cannabis sector include never to underestimate smaller rivals, and to focus relentlessly on what consumers want.
“Thinking about what makes Canadians tick. How are we different from our U.S. friends? Touching that nerve and making it feel local will be really important,” he said.
“I think we’re going to be able to teach people to have fun.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.