Justice Committee on Feb. 25th, 2021

[The Chair, Liberal, Iqra Khalid]

I call this meeting to order.

Welcome to meeting number 22 of the House of Commons Standing Committee on Justice and Human Rights. Today we have Mr. Masse replacing Mr. Gerretsen and Mr. Waugh replacing Mr. Moore. Welcome back, both of you, from our last meeting.

I want to remind members and witnesses that the proceedings will be available via the House of Commons website. I also want to make you all aware that the webcast will always show the person speaking rather than the entirety of the committee.

To ensure an orderly meeting, I would like to outline the following rules. Interpretation services are available for this meeting. You have the choice at the bottom of your screen to select floor, English or French.

Members and witnesses, you may speak in the official language of your choice. With the latest Zoom version, you may now speak in the language of your choice without the need to select the corresponding language channel, which basically means you can select the language you want to hear and you can speak any language that you would like.

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Speak slowly and clearly for the sake of our interpreters so that everybody can get a good translation and we don't put too much strain on our interpreters. I remind you that all comments by members and witnesses should be addressed through the chair. With regard to a speaking list, Mr. Clerk and I will do our best to maintain that consolidated order of speaking for all members.

At this time I would like to welcome our witnesses. From the Department of Agriculture and Agri-Food, we have Lisa Foss, executive director. From the Department of Justice, we have Carole Morency, director general and senior general counsel, criminal law policy section, policy sector. We also have Michael Ellison, counsel, criminal law policy section, policy sector. From the Saskatchewan Indian Gaming Authority, we have Zane Hansen, president and chief executive officer. Welcome to all of you. You will each have five minutes to make your introductory remarks and then we'll go in to our rounds of questions. We'll start with the Department of Agriculture.

Ms. Floss, you have five minutes. Go ahead.

[Lisa Foss, Executive Director, Canadian Pari-Mutuel Agency, Department of Agriculture and Agri-Food]

Thanks very much.

Good morning, Madam Chair and members of the committee. Thank you very much for the opportunity to speak with you today. I'm the executive director of the Canadian Pari-Mutuel Agency, CPMA. Let me start by explaining a little bit about the CPMA.

The CPMA is a special operating agency situated within Agriculture and Agri-Food Canada that regulates and supervises parimutuel betting on horse races. The legislative authority was established in the 1920s.

The mandate of the CPMA is to ensure that parimutuel betting on horse racing is conducted in a way that is fair to the betting public.

You might not be familiar with the term “parimutuel”. Very simply, it's a form of betting that is pool-based, where the bettors are competing with each other for a portion of the pool. The winners divide the total amount of the bet—that is to say, the pool—in proportion to their bets, less a predetermined percentage for the management of the pools by the racetrack operators, applicable provincial taxes and the CPMA's federal levy.

The CPMA's funding model is set up under the Revolving Funds Act, which means it does not receive any government funding. Rather, its revenue is generated through a 0.8% levy applied against each dollar bet in Canada on horse racing.

The total amount bet in Canada on horse racing in fiscal 2019 was $1.2 billion, which generated an annual revenue of just over $9 million for the CPMA. The sector and the CPMA rely on the revenues earned from this betting to fund their operations. Over the last decade or so, these funds, the total amount bet in Canada, have been declining steadily. In the last 20 years, they have dropped by about 27%.

With the funds generated through its levy, the CPMA currently monitors parimutuel betting at 31 racetracks and 145 betting theatres. Betting theatres might be something that you're familiar with at your favourite sports bar. The CPMA has a staff of 31. I'm going to very quickly highlight the three buckets of things that we do.

First, we provide regulatory approval and oversight for betting on parimutuel horse races. This includes, for example, ensuring accurate calculations of the amounts retained by the racetrack operators and the amounts paid out to the winners. We investigate complaints, and we audit systems.

Second, we issue betting permits and licences to Canadian racetracks and their associated betting theatres.

Third, we deliver the equine drug control, or anti-doping, program to deter the unauthorized administration of drugs and medications to racehorses. This national program ensures consistency and helps maintain the integrity of the sport. In an average year, the CPMA tests approximately 25,000 samples of blood or urine. Where a drug violation is found, a certificate of positive analysis is issued by the CPMA. It is up to the province to adjudicate and impose penalties on the violation. For example, that could be a fine or a suspension.

While the CPMA is focused on betting and equine anti-doping, it's the provincial governments that regulate the sport itself. For example, it is the provinces that assign the race dates; officiate the races, with judges and stewards; and license the racetracks, owners, trainers and jockeys.

Now, very quickly, I would like to address the technical elements of Bill C-218 as they relate to horse racing.

Bill C-218 is silent on horse racing, which means that if Bill C-218 proceeds as currently drafted, it could be interpreted as permitting the provinces and territories to conduct and manage all forms of betting on horse racing, including parimutuel betting, which is an area that is currently regulated by the federal government through the CPMA.

If the provinces and territories were to offer and regulate betting on horse racing, it could take customers away from the racetrack operators, who currently are the only entities issued betting permits by the CPMA. This would put further pressure on the horse racing industry and the revenues base of the CPMA.

That's it. I think that's my five minutes.

I'd be very happy to answer your questions related to regulating parimutuel betting on horse racing.

Thank you.

[The Chair, Liberal, Iqra Khalid]

Thank you very much for that.

We will now go to the Department of Justice, with Carole Morency and Michael Ellison.

You have five minutes. Go ahead.

[Michael Ellison, Counsel, Criminal Law Policy Section, Policy Sector, Department of Justice]

Thank you very much, Madam Chair.

Thank you for your invitation to appear in relation to Bill C-218, an act to amend the Criminal Code, sports betting. I'm pleased to appear before the committee in my capacity as counsel within the criminal law policy section of the Department of Justice.

Today I'm joined, as noted, by my colleague Carole Morency, who is senior general counsel and director general of the criminal law policy section.

I'd like to take this opportunity to offer some brief comments on Bill C-218 and the structure of the gaming and betting provisions of the Criminal Code and to discuss the differences between Bill C-218 and Bill C-13.

Bill C-218 proposes to decriminalize single-event sports betting by permitting provinces and territories to offer games or betting products concerning the outcome of a single sporting event, if they choose to do so, as what's called permissible lottery schemes under the Criminal Code.

Under Bill C-218, decriminalization would be achieved by repealing a single paragraph within the Criminal Code that currently excludes single-event sports betting from the definition of what is a provincial or territorial lottery scheme. This paragraph, along with the rest of the gaming and betting provisions, is located in part VII of the Criminal Code. The general structure of these provisions can be broken down in the following manner.

First, all gaming and betting activities are prohibited by default in Canadian law. From this general prohibition on gaming and betting, we find two carve-outs or exceptions, if you want to call them that, for legal gaming and betting.

The first carve-out or exception is the federal system of parimutuel betting on horse racing that my colleague from the CPMA just described. While many aspects of the horse racing industry are indeed regulated by the provinces and the territories, the actual parimutuel system of betting is regulated by the CPMA. As was just noted, it's a special operating agency within Agriculture and Agri-Food Canada.

Now, the second carve-out from the general prohibition on gaming and betting is in the form of the provincial and territorial lottery schemes. This carve-out has been in place since 1969-70; it permits provinces and territories to offer a very broad range of games that involve elements of chance or betting products.

We refer in the Criminal Code to provinces and territories “conducting and managing” these lottery schemes, and in fact this is very similar to regulating these lottery schemes. However, in limited circumstances the provinces and territories may also license other entities to operate lottery schemes. Typically we see this in the form of charitable lotteries. These charitable lotteries would be licensed by the provinces and territories.

This brings us back to Bill C-218. Subsection 207 (4) of the Criminal Code defines permissible lottery schemes. We find there the definition of what a “lottery scheme” is. So long as provincial and territorial authorities regulate gaming products within this definition, they are legal activities.

While the definition is broad, Parliament has maintained certain exclusions to this definition, and these exclusions in effect make specific activities once again subject to the general prohibition and therefore illegal.

The exclusion from the definition of a permissible lottery scheme that is the subject of Bill C-218 is found in paragraph 207 (4)(b) of the Criminal Code. This paragraph prohibits the provinces and territories from offering betting products on single-event sporting events. Repealing this paragraph would therefore leave the provinces and territories unrestricted in their ability to offer gaming and betting products that they consider appropriate for races, fights, single-sport events or athletic contests.

Bill C-13, in contrast, retains some of the language found in this paragraph and introduces the term “horse race”. The effect is that Bill C-13,, unlike Bill C-218, would retain the federal role of regulating systems of betting on horse racing across the country. Presently, in this paragraph, the terms “race” and “single-sport events” operate to prohibit provincial and territorial activity in this field.

Those are my comments, and I think my five minutes have just run out.

I'd like to thank you again, Madam Chair and everybody, for the invitation to my colleague and me.

[The Chair, Liberal, Iqra Khalid]

Thank you. We really appreciate this.

We'll now go to the Saskatchewan Indian Gaming Authority, with Zane Hansen, for five minutes.

Go ahead, sir.

[Zane Hansen, President and Chief Executive Officer, Saskatchewan Indian Gaming Authority]

Thank you, Madam Chair, and good morning to members of the committee. It's a pleasure to be speaking to you today on the topic of single-event sports wagering.

My name is Zane Hansen and I am the president and CEO of the Saskatchewan Indian Gaming Authority, SIGA for short.

I will quickly give you some background on our company. SIGA is a casino operator situated in Saskatchewan. We are owned by the 74 first nations in our province. About 25 years ago, our first nations collectively reached an agreement with the province to guide the development of casinos in Saskatchewan.

Our purpose for getting into the casino business is not unlike other jurisdictions. We view the industry as a means to create employment, support economic development and raise revenues for our communities.

Since the early 1990s, the industry certainly has been quite resilient and has delivered very well on expected benefits. From our perspective at SIGA, we've done very well, developing seven regional casino markets. We've created employment through that for over 1,800 individuals, of whom 65% or more are of first nations origin.

Supporting on-reserve economic development was key as well. That helps build local infrastructure and tax bases for our first nations communities. As a non-profit, we annually return millions of dollars to our first nations communities, the provincial government and our regional charity foundations. In the context of first nations development, these benefits have been of critical importance.

As we all know, we're not in normal times. COVID-19 brought our sector to an abrupt halt almost a year ago. Like most casinos across Canada now, our properties are currently closed. At this point, our company faces mounting losses and we have now placed about 93% of our employees on various forms of leave.

I want to say we're grateful for the wage subsidy program implemented by the federal government. That has been key to our survival through this year. While the impacts are painful, we also understand the difficult measures that need to be taken to address this and to counter the virus. We all must find our way through this very difficult situation.

One tool that will help us recover is single-event wagering. This is an important piece of legislation that will really assist operators across the country.

I would say the gaming industry is no different from other sectors of the economy where advances in technology and evolving customer preferences drive continuous change. Single-event sports wagering is the perfect example of that. Customers prefer it because it is a more dynamic form of wagering and it primarily takes place under relatively newer channels to deliver gaming, which are online and mobile.

You will hear of many positions to support single-event wagering. I'll just share a few from our view as an operator.

First, we simply want the opportunity to compete and offer a product that our customers like. We see, of course, the unregulated “grey” market conducting business in our province, taking a lot of money out and not returning benefits to our stakeholders. You will see, across the country, that gaming operators are also heavily invested in the industry. Single-event wagering will bring further investment as companies look for ways to enhance the gaming entertainment experience based on sport.

To give you an example of that, single-event wagering is a perfect opportunity to take a multi-channel view with our customers. We can enhance and modify the food and beverage formats within our casinos, and we can complement that with the other channel of online or mobile, where people can bet that way. This will not only diversify our revenue base, it will also drive reinvestment and employment back into our casinos, once legislated.

It also protects the interests of our customers. As regulated operators, we make sure our customers are well informed on the games we provide and the integrity of the game is preserved. As legal operators, we are held to high standards of accountability in areas such as industry regulation, responsible gaming and processing of financial transactions. I think it would improve that whole area.

Those are just a few of the reasons we see single-event wagering as such an important part of our future.

As a casino operator and on behalf of SIGA and our stakeholders here in Saskatchewan, I want to thank you for the opportunity to speak today.

[The Chair, Liberal, Iqra Khalid]

Thank you very much, Mr. Hansen. I appreciate you for staying within the five minutes for your testimony.

We will now go into our first round of questions, starting with Mr. Waugh for six minutes. Go ahead, sir.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you, Madam Chair.

I want to thank all three groups that have come to the justice committee here this morning.

I think I'll start with Ms. Foss.

What is the likelihood of provinces' permitting wagering on horse racing outside of the parimutuel system we have today?

[Lisa Foss]

That's a good question.

If we look at what's happening in other jurisdictions around the world, there is interest in providing fixed-odds betting on horse racing. I don't have a good handle on which provinces would be interested in offering that, but I do know that it's been successful in other jurisdictions. I don't know if you're calling witnesses from the provinces to the table, but I think there would be an interest in that.

Of course, the important thing to recognize is that it's expensive to operate a racetrack, and the infrastructure around putting that together is significant. If the provinces were to offer fixed-odds betting on horse racing without some sort of compensation for that infrastructure that's involved in putting that race together, that's the difficult thing to get your mind around.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

The offshore sites now, as you know, are offering racing in Canada, and we're getting nothing from that. Could you comment on that on behalf of the CPMA?

[Lisa Foss]

I guess I have a couple of things here.

I want to make it clear that I'm a public servant and that I'm a regulator. What would be interesting would be to hear directly from the horse racing industry and seek its views in terms of the dynamics.

One of the elements here to be mindful of is that the business model for the horse racing sector is founded on gambling dollars. Unlike other sports, the whole business model is in tune with the gambling dollars that are coming in. In terms of the CPMA, our revenue base is based on total dollars bet in Canada on horse racing. That's dollars that Canadians are betting on Canadian races and also dollars that Canadians are betting on foreign races. Our 0.8% levy is based on that dollar. However, the CPMA does not get any money when you have an American gambling in New York on a Canadian product.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

That would be Woodbine. It is the biggest in the country.

[Lisa Foss]

Ontario.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes, Ontario; you're right.

[Lisa Foss]

Ontario represents about 70% of the total dollars bet in Canada.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes, I knew that. Thank you, though, for confirming that.

Mr. Hansen, thank you for coming to committee today.

So much has been said about the casinos in Niagara Falls, along with Windsor. I brought you to committee—and you accepted—because of the indigenous aspect. This bill, Bill C-218, has a broad effect across the country. You had a very good statement today. You employ up to 1,800 people or more, and 65% of those are indigenous. This is the group that I feel in our province needs hope and opportunities. I think this bill's going forward gives your company and the people of Saskatchewan an opportunity for hope and employment because coming out of COVID is going to be, as you said, extremely difficult.

Could you comment on that?

[Zane Hansen]

Certainly, this has been an impact unlike anything we've ever seen in our business. Definitely, having single-event wagering as an approved form of gambling to incorporate into our business model will really assist us in rebuilding and going forward. It's going to be a whole new world getting our customers back into our building and feeling safe and comfortable. That is always paramount for us. Adding this into our product mix, and reinvesting and integrating it with our bricks and mortar properties, will be a very important piece. It helps diversify the customer base, and it helps diversify the revenue base. That will help us get our business stronger and create more opportunity for people.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

How much funding are the Province of Saskatchewan and SIGA losing, do you think, with single-game betting now on offshore sites, unregulated sites? Give me an rough estimate. I have no idea, but you're in the business, so what does it mean?

[Zane Hansen]

What we've seen in other jurisdictions.... There are studies out now. At the high end, say, in the U.K. with regard to single-event wagering, a common way to engage broad macro-type revenues is spend per adult annually. In the U.K., they are hitting in the neighbourhood of $75 per adult every year. More recently, in New Jersey, with legalization there, they're in the neighbourhood of $50 per adult. I will say that, because sports exist primarily through the online mobile channels, the impact of COVID has really grown that. You really take your adults—in Saskatchewan, we have about 890,000—and look at $50 to $75 as a potential global amount, and not all of that is new. However, $20 to $30 per adult is what we're exactly losing out on right now.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

That is substantial on reserves and in your communities, plus the provincial government gives a lot of money back in culture, sports and recreation, which we're losing out on today because of this unregulated market.

[The Chair, Liberal, Iqra Khalid]

That concludes your time, Mr. Waugh.

Thank you very much, Mr. Hansen.

We'll now go to our second questioner, Ms. Élisabeth Brière. You have six minutes. Go ahead.

[Élisabeth Brière, Liberal, Sherbrooke, QC]

Thank you, Madame Chair.

Thank you to all our witnesses today.

My first question is for Carole Morency.

In the interest of all parliamentarians, including mine, could you first explain to us the difference between parimutuel betting and single-event sports betting, which has fixed odds?

[Carole Morency, Director General and Senior General Counsel, Criminal Law Policy Section, Policy Sector, Department of Justice]

Thank you for your question.

I will ask my colleague Michael Ellison to answer your question.

[Michael Ellison]

As Ms. Foss described, parimutuel betting is a form of pool betting. While I would defer to her on the specifics of the exact operation of parimutuel betting, it is essentially a form of pool betting. All interested bettors on the outcome of a horse race pool their bets together. A levy is taken out of that pool for the operation of the CPMA and to help pay for the horse industry in general, including the race operators. The remaining money, depending on the outcome of the race and which horse was bet on, is then divided up between them. That is the pool-based system.

The difference between that and single-event sports betting is that...essentially there is no difference. Single-event sports betting is legal in Canada in one form, and that is parimutuel betting, because ultimately this parimutuel betting system that's in place, which is regulated by the CPMA, is a form of betting on the outcome of a single sporting event.

While Bill C-218 seeks to decriminalize single-event sports betting, it does so when we're talking about provincial and territorial powers. The bill would propose to decriminalize single-event sports betting, including betting products and games of chance, however they are set up by the provinces and territories within their structure of lottery schemes.

To quickly sum up, parimutuel betting—as it's constructed under the CPMA currently—is one form of single-event sports betting, but there are no other legal forms of single-event sports betting today.

[Élisabeth Brière, Liberal, Sherbrooke, QC]

Why was single-event sports betting not allowed in the past? What has changed for us to be moving forward today?