Justice Committee on March 9th, 2021

[The Chair, Liberal, Iqra Khalid]

I call this meeting to order.

Welcome to meeting number 23 of the House of Commons Standing Committee on Justice and Human Rights.

Today, Mr. Masse is replacing Mr. Garrison. Mr. Masse is appearing in person. Mr. Waugh is replacing Mr. Cooper, and Mr. Kusmierczyk is replacing Mr. Kelloway. Welcome to the three of you.

For the first hour, Mr. Brassard will be replacing Mr. Moore. Welcome, Mr. Brassard.

To ensure an orderly meeting, I'll outline a few rules. Members, you all know this. Witnesses, we're hoping that you'll get familiar with them.

Interpretation services are available for this meeting. You have the choice at the bottom of the screen of floor, English or French. Members and witnesses, you may speak in the official language of your choice. With the latest Zoom version, you don't need to select the corresponding language channel. Just select the one that you'd like to listen to.

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Mr. Brassard, your microphone will be controlled as normal by the proceedings and verification officer. Please ensure that you're following the guidelines for mask use and health protocols while you're in the room.

When people are not speaking, please ensure your microphone is on mute. This is a reminder that all comments by members and witnesses should be addressed through the chair. I would ask you to please speak slowly and clearly, so that the interpreters have a good time translating and interpreting what you're saying.

I would now like to welcome our witnesses.

Appearing as an individual, we have Chris D. Lewis, a retired commissioner of the OPP. From Racetracks of Canada Inc., we have William Ford, president. From the Woodbine Entertainment Group, we have Jim Lawson, chief executive officer, and Christina Litz, vice-president, media and business development.

Each of the witnesses will have five minutes to make opening remarks. I have with me a one-minute card and a 30-second card, so that you can keep time with your remarks and we can make sure that the meeting goes as smoothly as possible.

Welcome to the witnesses.

We'll start with Mr. Lewis, for five minutes.

[Chris D. Lewis, Retired Commissioner, Ontario Provincial Police, As an Individual]

Thank you, Madam Chair.

Good morning, ladies and gentlemen.

Thank you for inviting me here today to provide some commentary regarding Bill C-218. My name was put forward as a potential witness by the Canadian Gaming Association.

One of the arguments made in favour of decriminalizing cannabis in Canada similarly applies to the sports wagering issue. It's a product that millions of Canadians spend billions of dollars illegally to obtain. It is estimated that Canadians spend $10 billion annually through illegal sports betting operations controlled by organized crime.

In December 2019, the Ontario Provincial Police organized crime enforcement bureau broke up a Hells Angels-controlled illegal gambling ring in southwestern Ontario that earned $131 million over a five-year period. Based on the average profit margin of 5% to 6% for a sports book operation, this single organized crime operation would have accepted close to $2.5 billion in illegal wagers over that five-year period.

The OPP alleged that Hells Angels members controlled the illegal gambling ring through five websites. Many of the gamblers utilizing these sites would not understand that the sites were controlled by an organized crime group.

It is important to note that with the organized crime illegal gambling model come criminal turf wars, resulting in assorted violent crimes right up to and including murder. There have been a number of gangland murders in the greater Toronto area alone over the past several years related to the control of illegal gambling marketplaces, including shootings, arson and fire bombings.

There is a severe public safety risk related to that activity, as well as tremendous financial costs associated with responding to, investigating and prosecuting such acts of violence. In addition, investigating organized crime group activities is extremely resource-intensive from human, technology and operational funding perspectives.

According to a 2019 report from Criminal Intelligence Service Canada, or CISC, illegal bookmaking exists in every single region of Canada. While the exact size of the illegal sports book market is not known, it is believed to be significant. Some estimate it is in excess of $10 billion annually.

There are several examples of large-scale illegal betting operations run by organized crime having been broken up by law enforcement. These activities provide revenue to organized crime groups that allow them to fund a variety of other criminal activities.

The public report on organized crime in Canada highlights the use of illegal gaming operations by organized crime groups as a high-profit, low-risk market. It states on page eight:

[Outlaw motorcycle groups] collaborate with other [organized crime groups] in the importation of cocaine and other illicit drugs, and have networks stretching across Canada that facilitate their well-established distribution lines. They are criminally associated to groups that form the [traditional organized crime] network, and are involved with [organized crime groups] involved in illegal online gaming....

On page 12, the report says:

Gaming networks generate millions of dollars of revenue each year, and [organized crime groups] involved in this market use these illicit funds to finance other forms of criminality, such as drug importing and trafficking.

For individual bettors, dealing with organized crime in terms of sports betting brings additional personal risks. Organized crime groups will provide loansharking and allow individuals to far exceed their financial capacity at exorbitant criminal interest rates. Then they will hang the threat of physical violence and other forms of extortion over the borrowers' heads to ensure the repayment of accumulated debts in a timely way.

The Government of Canada has made it a priority to develop new policy and legislation to reduce organized crime activity. The Prime Minister's 2019 ministerial mandate letters for the Minister of Public Safety and Emergency Preparedness and the Minister of Justice and Attorney General of Canada included statements to that end.

The Government of Canada cited that one of its primary reasons for legalizing cannabis was to eliminate the criminal element and reduce organized crime's access to the large profits generated. It's time to apply that same logic to sports wagering and pass the amendment to the Criminal Code to permit single-event sports wagering.

The majority of Canadians who engage in sports betting believe they are engaging in a fun and harmless activity, as it is often presented as being legal and respectable. They are often unaware of the significant profits criminal organizations make as a result.

Bill C-218 will allow for greater regulation and oversight to ensure that Canadians are wagering in a safe and secure environment. A legal, regulated sports betting marketplace will provide the gambler with a safe and secure environment to bet in and the confidence that appropriate, responsible gambling measures are in place.

For more than three decades, Canadian provincial regulators have demonstrated an extremely strong track record in overseeing the development of industry-leading consumer protection safeguards, resulting in safe and responsible regulated gambling environments for Canadian players—

[The Chair, Liberal, Iqra Khalid]

Thank you.

I apologize, Mr. Lewis. That brings you to a little more than five minutes, but I'm sure we will get the rest of it.

[Chris D. Lewis]

I'm sorry. I wasn't looking up.

[The Chair, Liberal, Iqra Khalid]

That's okay. Thank you.

We will now go to Racetracks of Canada Inc., with William Ford.

Please go ahead, sir. You have five minutes.

[William Ford, President, Racetracks of Canada Inc.]

Good morning, Madam Chair and members of the committee.

My name is Bill Ford, and I'm here today on behalf of Racetracks of Canada. I appreciate the opportunity to speak.

Racetracks of Canada is a national organization representing over 40 racetracks across the country. Some are large like Woodbine in Toronto, but the majority are smaller seasonal tracks that play vital roles in their respective communities, many of which are in rural Canada.

Before turning to my substantive comments, I would like to provide some key statistics from a 2019 Jockey Club of Canada report on the Canada-wide economic impact of horse racing and breeding: $2.9 billion in value-added GDP; 56,000 full-time equivalent jobs; $2.1 billion in wages and salaries; and $1.2 billion in tax revenues to all levels of government.

I'm not here today to speak out against the sports betting bill. Over the last several months, our industry has stated its support for the legalization of fixed odds, single-event sports wagering in Canada. The horse-racing industry is particularly well suited to speak to the benefits of legal and properly regulated wagering in Canada. Black and grey markets benefit nobody.

However, it is vitally important that the legislative process considers the unintended consequences should the horse-racing industry not be protected.

Today, the horse-racing industry's business model is supported by parimutuel wagering. Section 204 of the Criminal Code establishes the parimutuel wagering system on horse racing when regulated and approved by the Minister of Agriculture and Agri-Food. Under the ministry, the Canadian Pari-Mutuel Agency, commonly referred to as the CPMA, has been set up as the industry's regulator.

The parimutuel system works as the house takeout is used to sustain the industry through payments to participants. Further, to obtain a parimutuel betting permit from the CPMA, a racing association must show that it has an agreement in place with its local horse people's group. This ensures that all stakeholders are invested in the parimutuel model.

Private member's bill C-218 as currently drafted could allow provincial lottery schemes and other licensed organizations to offer fixed-odds betting on horse racing. This could be done without any contributions back to the industry.

Bill C-13, which was another bill recently introduced by the federal government to legalize fixed-odds single-event sports wagering, included language that would prohibit any organization from accepting a fixed-odds wager on horse racing, ultimately protecting the industry from the risk highlighted earlier. We are strongly asking for the same protection in Bill C-218. Our industry and stakeholders need it.

That said, we can see the writing on the wall. The legalization of single-event sports betting will see the influx of massive foreign companies and leagues entering the Canadian wagering market. Competition will be severe, and racing will see market share shrink over time. It could potentially result in the closure of some tracks, which are already on the brink of financial non-viability, and the loss of thousands of jobs.

To that end, we are also requesting that historical horse racing be legalized. Historical horse racing is a parimutuel gaming product where individuals can place a wager on the outcome of races that have occurred in the past. Historical horse racing is currently prohibited by the Criminal Code, despite its being a proven and legal product in many jurisdictions.

With a simple change to the Criminal Code to allow for bets to be taken on an event that has taken place in the past, historical horse racing could be quickly introduced into the market, and would provide the entire horse-racing industry with a substantial and much-needed new revenue stream. This stream would be particularly beneficial to the smaller tracks that only run seasonally for a few weeks a year.

The industry has been speaking to the CPMA for years about the possibility of introducing historical horse racing to Canada. The CPMA has stated it is prepared to regulate it as a parimutuel wagering should the Criminal Code be amended.

In conclusion, Madam Chair, the horse-racing industry and Racetracks of Canada are supportive of the legalization of sports betting in Canada. However, it cannot be at the expense of a well-established industry that supports thousands of jobs and is the lifeblood of many rural communities.

Done correctly, single-event sports betting can create new jobs for Canadians and generate new revenues for the government all while protecting another industry, the horse-racing industry.

Thank you.

[The Chair, Liberal, Iqra Khalid]

Thank you very much, Mr. Ford. That was five minutes on the dot.

We'll now go to the Woodbine Entertainment Group, with Mr. Lawson and Ms. Litz.

Please go ahead. You have five minutes.

[Jim Lawson, Chief Executive Officer, Woodbine Entertainment Group]

Good morning, Madam Chair, members of the committee and other attendees. I'm Jim Lawson, the CEO of Woodbine Entertainment Group. My colleague Christina Litz and I appreciate the opportunity to speak with you this morning.

Woodbine Entertainment is the largest racetrack operator in Canada. I believe it is critical for this committee to understand our organization's mandate. Operating like a not-for-profit organization, our sole mandate is to sustain the horse-racing industry in Ontario. We do not have any owners, nor do we have any shareholders. We operate to ensure that the horse-racing industry in Ontario, which also supports the entire horse-racing industry in Canada, is sustainable.

All income is reinvested in our core operations and other strategic initiatives intended to benefit and serve the entire industry. In short, we feel we are here today representing the entire horse-racing industry in Canada.

I'll turn it over to my colleague Christina Litz for further words.

[Christina Litz, Vice-President, Media and Business Development, Woodbine Entertainment Group]

Good morning, committee members. Thank you for the opportunity to speak with you today.

I'm new to the horse-racing industry. I joined Woodbine Entertainment just over a year ago, after leading marketing, digital and strategy at the Canadian Football League. In years previous to that, I was with some of Canada's leading media companies.

One of the things I loved most about being at the CFL was, in essence, that it was a mission-led organization uniting the country with one of its greatest traditions. Little did I realize, and what I hope we can share with you today, is how important the horse-racing industry is to Canada, both because of the tradition of the sport but now, even more importantly, because of its positive economic impact in our country.

The horse-racing industry generates approximately 50,000 full-time equivalent jobs across rural and urban Canada and contributes billions of dollars annually to the national economy. The production, care and racing of horses have economic benefits flowing through several sectors, including agriculture, entertainment, tourism, manufacturing and gaming. These jobs go well beyond the athletes and include trainers, grooms, riders, farmhands, veterinarians, harness and saddle makers, blacksmiths, and hay and grain suppliers, among many others.

Over the last several months we have publicly stated our support for the legalization of fixed-odds single-event sports wagering in Canada. You may be surprised to know that this industry is an innovative one, one that understands the evolving way in which the next generation of sports fans are engaging with sports.

However, it is vitally important that the legislative process considers the unintended consequences the horse-racing industry could experience should it not be protected.

Jim.

[Jim Lawson]

Thank you.

Currently the only backbone for the horse industry's business is parimutuel wagering. The industry operates the only legal single-event sports betting in Canada today, and it allows racetracks to earn income from legal wagers that are used to cover the substantial costs to produce our content. The parimutuel wagering also allows for profits to be shared with horse people, horse associations, breeding programs and horse aftercare programs.

As you have heard from Bill Ford of Racetracks of Canada, parimutuel wagering is a betting system in which all bets of a particular type are placed together in a pool, with payouts determined by the sharing of the pool among the winning wagerers, while fixed-odds payouts are agreed at the time a bet is made. Fixed-odds betting has mass appeal to large wagerers. The new generation of wagerers and large wagerers have grown up betting on points spread, much like you see in the National Football League.

This distinction is at the heart of the gravest risk to the Canadian horse-racing industry as your committee considers sports betting legislation. If the private member's bill, Bill C-218, is passed with its current language, it will allow others to offer fixed-odds wagering on horse racing. The horse-racing market is a zero-sum game. Horse-racing wagerers who would access fixed-odds betting will move away from the Canadian parimutuel pools. This will dramatically cannibalize the Canadian horse-racing industry's market share, and these operators would earn the revenue without contributing to the substantial costs of producing our content.

In other major sports betting jurisdictions in the world, notably Australia, fixed-odds wagering on horse racing has surpassed parimutuel wagering. In both Australia, and more recently in New Jersey, one of the first to implement and coordinate horse racing with sports betting, the government has introduced frameworks to protect the horse-racing industry.

We are requesting that private member's bill, Bill C-218, adopt language to protect the horse-racing industry. To do otherwise will ultimately destroy our industry.

Bill C-13, recently introduced by the federal government, has language to protect the industry from this risk. It is now incumbent on the government to insert its own language in the private member's bill to save an industry and the livelihoods of more than 50,000 families across this country.

[The Chair, Liberal, Iqra Khalid]

Thank you, Mr. Lawson.

Thank you, Ms. Litz. I'm sure the rest of your testimony will come out during questions.

We'll now go to our first round of questions, for six minutes each, starting with Mr. Waugh.

Please go ahead, sir.

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

Thank you, Madam Chair.

I want to thank Racetracks of Canada, Woodbine Entertainment Group and Mr. Lewis, the retired commissioner of the Ontario Provincial Police.

I'm going to start mainly questioning Mr. Lewis, because when I looked at the previous bill in the last Parliament, this was the issue when I started formulating my thoughts on single-game event betting.

Mr. Lewis, you've been associated with the OPP for many years. When I saw that at least $10 billion is bet annually through black market sport books in this country, including some, as you mentioned, through criminal organizations such as the Hells Angels, that was one of the most intriguing things to me. That was why I jumped on this bill. Provincial and territorial authorities are losing revenue because of this.

You touched on it a little bit with the arrest in 2019 of that organization connected with the Hells Angels in southern Ontario, but how big do you think the black market in single-game betting is in this country?

[Chris D. Lewis]

It's tremendous, sir, without a doubt. I can't even begin to estimate the number of people—other experts out there would know—but there is a whole pile of Canadians who are betting and spending billions of dollars annually through systems now, which many wouldn't understand are, as I said, run by the Hells Angels or traditional organized crime groups—mafia, for lack of a better word.

It's happening anyway. As I said, much as with marijuana or cannabis legalization, the situation is that people are doing it anyway. The choice the government has is to pull it out of that murky, clandestine, illegal marketplace, which facilitates other organized crime activity through the funding they gather, and bring it into a well-regulated and well-controlled safe environment in which the government actually makes profits that they can turn back into community programs and other things.

Getting the Hells Angels and traditional organized crime out of it as much as possible—it will never end totally—is key.

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

During Super Bowl week, we often hear of police raiding places. That seems to be the only time of the year that Canadians hear about this. There will be a raid during the week before Super Bowl week or on Monday or Tuesday leading up to the Super Bowl.

The basic threat to criminality in this country is really through unregulated single-game betting, I would think.

[Chris D. Lewis]

It is. With it comes, of course, turf wars. Much as we would think that two drug dealers are fighting over the turf of one corner in a city somewhere to sell their drugs, the turf wars over the marketplace in illegal gaming have resulted in tremendous acts of violence.

What is the risk to the public? It is to some person sitting in a café in York Region when a bomb goes off that really had nothing to do with illegal gaming but is just a turf-war issue. Some of those huge impacts—from a violence perspective and then the illegal loansharking, and all the other things that come with that—provide so much criminal activity and so much funding for organized crime to allow them to buy guns and other things that they are of course involved in, such as human trafficking operations, that there's quite a jeopardy to public safety all around.

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

I was shocked by the five-year period you mentioned in your speech with $131 million, and it took $2.5 billion of unregulated betting just to get to that $131 million.

When I looked at this bill in the previous Parliament, I often thought $10 billion was short. I'm really fearful that if this bill doesn't proceed, this will escalate in Canada more than we've ever seen. To me, $10 billion in the underground economy, and not only through the illegal websites that we're seeing offshore, is a major concern in this country that I think needs to be dealt with. That's why it's important to get this bill forward.

[Chris D. Lewis]

I absolutely agree with you.

Right now we're having a meeting virtually. In these times, people are spending much more time on computers within their residences because of the COVID situation, obviously, and we don't know what the future brings around that other issue. How much of an increase is there going to be in this illegal gambling activity?

Having it properly regulated by the provinces, with the proper responsible gaming programs in place, along with education, etc., would I think be a big step forward.

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

We're not going to get all $10 billion that is bet in the grey or black market, but if this bill were to pass, we would be getting some of that money regulated.

Do you have an idea how much would be regulated out of the $10 billion we're looking forward to?

[Chris D. Lewis]

I do not. I don't have that expertise.

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

The Liberals brought in the cannabis bill in 2019, I believe, so that's a couple of years ago. Is there any tracking from the cannabis industry as to where it is today versus where it was when it wasn't regulated?

Can we assume that for the illegal single-game sports betting, with a regulated system...? Is there anything that you can, with your experience in the OPP, relate with regard to the two of them, because the bills are pretty similar, when you look at cannabis and single-game betting?

[Chris D. Lewis]

Without a doubt, organized crime will continue to profit. I don't know the exact percentages per se.

[The Chair, Liberal, Iqra Khalid]

I'm sorry. We're out of time for Mr. Waugh, but hopefully, in the next round, Mr. Waugh will be able to pursue that.

We'll now go to Mr. Maloney, for six minutes.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

Thank you, Madam Chair. I'm actually going to pick up where Mr. Waugh left off.

Mr. Lewis, I have some questions for you. The premise that it happens anyway, that argument, can be applied to a whole bunch of different things. As you point out, it was used in the introduction to the legalization of cannabis legislation. It's a big part of the discussion here. You could apply it to all kinds of things. The reality is that you have to temper that with issues like safety, morality and other concerns. That's really what this is about. You'll agree with me that this law isn't going to solve the crime problem, because bad guys will find ways to do bad things.

Right now you can go to a bookie in Toronto, or anywhere, and place a bet, and he'll carry you for a while. You're not going to be able to do that with a legalized single-event sports betting facility. I don't think you'll eliminate it on that basis.

There are also going to be restrictions on the amount of money you'll be able to bet in a legalized system, which I don't think exists, at least not to the same extent, in an illegal one. On the flip side, you have good guys who are now trying to get into this business, because they want to get rid of the bad guys, but their motivation is making money and greed. You're seeing that now with some of the professional sports organizations. They're jumping all over this thing, because it's another revenue stream for them.

I'm in favour of the bill, just so you know.

Have all of these things been discussed, to your knowledge, with provincial authorities, who are going to be the ones regulating all of these things after the fact to make sure these safeguards are in place?

[Chris D. Lewis]

Without a doubt. The Alcohol and Gaming Commission of Ontario, AGCO, which has a large OPP contingent in it that conducts investigations around the legal betting schemes and lotteries, etc., is well prepared to put systems in place very similar to what it has now on the other fronts that it oversees within casinos and lotteries. It's prepared for that, and responsible gaming is going to be a huge part of that.

You're right, sir. You're never going to eliminate organized crime. My argument on the cannabis front was that organized crime was always going to undercut. It was still going to make money.

There are a lot of issues, without a doubt, that are very similar between these two pieces of legislation or proposed legislation. Eliminating a whole pile of organized crime and eliminating people from placing bets they can't afford and borrowing money to do it, and then paying unbelievable interest rates and suffering threats of violence, etc., does differentiate. A lot of that will be eliminated, but not all. You're totally correct.

[James Maloney, Liberal, Etobicoke—Lakeshore, ON]

I could go down this road for a long time here, but I want to bring in Mr. Lawson, Mr. Ford and Ms. Litz, because this issue with respect to horse racing is pretty critical. I don't think anybody's intention was to in any way hurt the horse-racing industry and all the benefits that go with it. It's important that we address that issue.

One of the things that actually dovetails between the two issues is that if single sports betting is allowed, but the carve-out to protect the horse-racing industry is included, isn't there an issue about where people are going to go to place these bets? That's going to have some impact on it too, and this goes to the regulation issue, Mr. Lewis.

Somebody mentioned other people, foreign entities, coming in and getting involved. Am I going to be able to go to a betting shop on Bloor Street and bet on the Leafs game tonight, the Habs game tonight or a horse race? Is it still going to be restricted to venues like Woodbine and places that exist currently?