Justice Committee on March 9th, 2021

[Chris D. Lewis]

Was that question directed at me, sir?

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

Actually, let's start with Mr. Lawson first, and then Mr. Ford and Ms. Litz.

[Jim Lawson]

Thank you.

Listen, I think that by protecting it as you suggest what it will require with these behemoth sports betting operators—most of whom, as we know, are foreign, and the names are familiar to us—is understanding their backgrounds. Most of those companies are in the United Kingdom. Many of them are in Australia. They've morphed into the United States in a big way.

They like horse racing, and they want to work with horse racing, so I do think that by protecting the horse-racing industry, as the government bill suggested, we'll have these sports betting operators working closely with the horse-racing industry. I think we'll be protected in that fashion, in that they want to offer parimutuel wagering as part of their sports betting offering. That's what they've done in the United States.

We expect that, with that protection, it will set up a framework within the provincial lottery corporations in terms of how it's managed and controlled, such that they will be working with us, as opposed to having operations completely distinct from horse racing.

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

Thank you.

I only have 30 seconds left. Does anybody else want to take a shot at that?

Mr. Lewis?

[Chris D. Lewis]

I absolutely agree with what Mr. Lawson just said. The provincial gaming authorities will ultimately make those decisions. I think they'll make very reasonable decisions based on what's best not just for the industry but for government, for safety and for doing things in an environment that prevents crime from being involved.

As for how that rolls out exactly in the end game, I don't have any idea.

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

Thanks very much, all of you. I'm out of time, unfortunately, but I'm very grateful.

[The Chair, Liberal, Iqra Khalid]

Thank you very much, Mr. Maloney.

We'll now go to Monsieur Fortin.

Monsieur Fortin, please go ahead. You have six minutes.

[Rhéal Fortin, Bloc, Rivière-du-Nord, QC]

Thank you, Madam Chair.

I want to thank the witnesses for being here today.

My question for Mr. Ford pertains to what has already been discussed. The people in the racetrack industry are concerned that, if Bill C-218 were to pass, they would lose revenue. Mr. Lewis spoke—and he isn't the only one who has done so—about the single-event betting done through the criminal network.

Mr. Ford, do you think that legalization would really affect racetrack revenue?

[William Ford]

Yes.

Today, the parimutuel model wagers about $1.2 billion that is legal and goes through the CPMA. We're aware that there is a significant grey market area offshore where wagers go.

We would be very concerned if Bill C-218 came in unamended and fixed-odds wagering on horse racing were allowed. We could see that $1.2 billion totally undermined and easily cut in half. Those people who have received the licences from the various provinces would be under no obligation to pay into the system. The whole entire system could therefore collapse upon itself.

We absolutely need these protections that were in the government bill, BillC-13. With that, I think we can maintain the parimutuel system going forward.

That said, one of the things that we are telling all of our members is that you must work with your local provincial regulator. You must understand how it is going to roll out in your province and ensure that horse racing and tracks can play a meaningful role.

[Rhéal Fortin, Bloc, Rivière-du-Nord, QC]

Right now, single-event betting on horse racing is controlled by organized crime. Do you know what this means financially?

You said that, if Bill C-218 were to pass, about half of your $1.2 billion in revenue would be affected. That said, have you estimated how much of that money is currently going to the black market, to criminal organizations?

[William Ford]

We don't have a great estimate. The grey market and the black market do not publish their numbers. We just know that anecdotally I can go on my computer and I can find 10, 12, maybe 13 sites that are selling the Woodbine, the Hastings or the Trois-Rivières signal illegally, and people are making bets through those sites and not paying anything into the system. I don't think I would be exaggerating to say it's probably north of $200 million that is just disappearing right now.

[Rhéal Fortin, Bloc, Rivière-du-Nord, QC]

So the amount right now would be around $2 million, based on a rough calculation. However, you're talking about half of $1.2 billion. So that's $600 million. I gather that you're estimating that the $600 million or so currently going to parimutuel wagering would be directed to single-event betting. Government agencies or private companies would take single-event bets.

Is that right?

[William Ford]

Just to clarify, the number that is bet parimutuelly in Canada, legally through the CPMA, is $1.2 billion today. We believe that if Bill C-218 were to come in unamended, there could be fixed-odds wagering legal in Canada and perhaps as much as half of that parimutuel number, $600 million, could disappear and the industry would not benefit from that handle number.

You've asked me to also guesstimate what I think the offshore market on Canadian horse-racing products could be today, and I am saying I think it could be north of $200 million.

[Rhéal Fortin, Bloc, Rivière-du-Nord, QC]

Could you tell us a little more about where these figures come from?

I don't want to suggest that you're wrong, Mr. Ford. I think that you're probably right. I would still like you to tell us where these figures come from. How can you estimate that the potential market for single-event betting at racetracks is $600 million a year?

[William Ford]

We know that the $1.2 million is the true number from the CPMA. Our estimate that half of that could go away is really looking at foreign markets and using Australia as the example.

Mr. Lawson said earlier today that there fixed-odds wagering has actually surpassed parimutuel wagering. You wouldn't envision that it would occur at first instance, but looking at the history and the trajectory of fixed-odds wagering in other jurisdictions, I don't think it's unreasonable to say it could easily take half of that parimutuel number and that's where we're coming from there.

With respect to the offshore numbers, as I mentioned, they're not very free with their numbers. That's really more of a guesstimate on the true size of the black market.

[The Chair, Liberal, Iqra Khalid]

Thank you.

Thank you, Monsieur Fortin. That was an extra 30 seconds for you today.

We'll now go to Mr. Masse for six minutes.

Go ahead, Mr. Masse. I know you're in the room, so you could just hit your mike.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair, and thank you to all our witnesses who are here today.

I'll start with Mr. Lewis.

It's been 10 years since Joe Comartin and I were working on this. I remember Geoff Hall, his legislative assistant, doing some of the initial work with regard to the amount of revenues going to organized crime on this. It was more than just a freedom of choice with regard to an entertainment or a way of changing things. We saw the same thing happen with dice games. Previous to that, it was Shaughnessy Cohen and Joe Comartin who changed the legislation that allowed for dice games for craps because we basically saw illegal markets all over our community, especially on the border, where it was touching with organized crime.

If we don't pass this here, do you have any doubts that...? I think it's important. We think of organized crime as being in your backyard, your basement, the typical bookies and bullies and so forth, but it's much more sophisticated than that. It's online and it's being done in a different way from ever before.

Can you touch a little bit on this? Is if we don't do this and we subject ourselves to another 10 years of waiting, what's going to take place with regard to organized crime and having Canada being an outlier whereas the rest of the world has moved on?

[Chris D. Lewis]

Thanks for the question, Mr. Masse. You hit the nail right on the head.

Most people perceive organize crime as a couple of guys wearing leather jackets, hiding in an alley somewhere and beating people up. That's folklore, old movie stuff. The reality is that organized crime groups are mostly not even seen. Particularly, we're talking about traditional groups such as the mafia and outlaw motorcycle gangs. They are the primary organized crime groups that are involved in illegal gaming.

These networks are huge. They're international. They're tied together. They often form partnerships to work together. At the same time, there are those wars that I spoke of, which will continue. We'll have more bombings. We'll have more innocent people hurt. We'll have millions and millions of dollars in police funding to investigate these events that are a threat to public safety, in addition to the potential loss of revenue, let's say, to government from not being part of this.

It's huge. It's going to get worse before it gets better. More lives will be lost. More money will be spent and not as much money gained, but it's going to happen anyway.

[Brian Masse, NDP, Windsor West, ON]

Yes, that's the thing. It's a revenue stream for other criminal activity. That is what worries me about this, especially with the United States where I am. There's obviously employment in our region that's important for our regulated operators like the casino and so forth, but it's also the fuelling of other options.

With your professional background, do you suspect, with the United States moving towards a regulated industry, that Canada will then become more of a centre for organized crime if we do not pass this? If we become the one state that does not have a regulated system for single-event sports betting, we will actually become a focal point for criminal activity that's pushed out of other regions.

[Chris D. Lewis]

The organized crime groups are undoubtedly international. They don't recognize borders at all. Other than the physicality of having to cross a border at some point, when it comes to the online sites and whatnot that are doing this illegally, borders are not an issue. They will fill any gap. If there is more business to be had in Canada because of an unregulated system, then they will fill that gap. They will provide the service.

I think 15 U.S. states so far, and more to come, have regulated with similar legislation. They're going to look for the weak spots. If the weak spot is Canada and there's more money to be made here, they'll operate here.

[Brian Masse, NDP, Windsor West, ON]

It's ironic because it was a New Jersey court case, but to think we're here because basically Nevada got a special pass because organized crime set up there to create the whole system. It's bitter irony that we're at this point in time.

I'm going to move really quickly to Mr. Ford.

You mentioned Bill C-218 and Bill C-13. The government's position on that.... We were part of...with Mr. Comartin and Mr. Hall drafting this current bill. Thanks to Mr. Waugh for taking it up.

The government bill was different from ours. I actually fought, ironically, to keep both bills alive. The government's position was that they were different. Not only did I deny them two opportunities to drop it in the House, but I spoke against it to the Speaker. The ruling has been that the two bills are too similar.

Do you have a specific amendment that you would want to have, because I think you have to convince the government of that? Even on that, the parliamentary secretary appealed to the Speaker to dismiss even my intervention on the floor of the House of Commons.

Do you have a particular remedy that you're looking for with regard to the situation that you're in?

[William Ford]

Yes.

I can't speak to the nuances of your House rules, but what we're very simply asking is this. Bill C-218 deleted a paragraph, and we're asking that this just be amended. It is paragraph 207(4)(b). We're asking that the language, as very specifically set out in Bill C-13, be adopted and dropped into Bill C-218.

[Brian Masse, NDP, Windsor West, ON]

Okay. That's just the straightforward remedy right there to your concern.

We heard testimony. I know I only have a few seconds, and I'll come back later. We heard testimony by the Department of Agriculture that the current system is just not sustainable. We had that testimony.

I know I'm out of time, Madam Chair. Thank you very much.

[The Chair, Liberal, Iqra Khalid]

Thank you very much, Mr. Masse.

We'll now go to our second round of questions, starting with Mr. Brassard for five minutes. Go ahead, sir.

[John Brassard, Conservative, Barrie—Innisfil, ON]

Thank you, Madam Chair.

I want to carry on with the cannabis situation that Mr. Lewis was talking about earlier. With the legalization of cannabis, we've heard from mayors and police chiefs across the province of the various loopholes that exist that are allowing for large marijuana grow-ops.

Mr. Lewis, where do you foresee some of the areas where organized crime might be able to, for lack of a better term, do an end around on government-regulated sports betting?

What are some of the loopholes they may try to use?