Advertising and Marketing Online Gaming and the Canadian Criminal Code

Generally speaking, “real money” online gaming enterprises with “substantial connections” to Canada violate the gaming and betting provisions of Part VII of the Canadian Criminal Code (the “Code”).  For this reason, online gaming enterprises that involve Canadian individuals must move as many aspects of their operation offshore as possible to minimize connections.

Different considerations come into play when offshore online gaming and betting operations advertise their services to Canadian residents using Canadian-based advertising and marketing firms and Canadian media outlets.

Assuming that an online gaming enterprise has minimal connections to Canada (operation and conduct entirely outside Canada), is it legal to market the website to Canadians bettors and gamers?

Law enforcement authorities do not appear confident that the existing provisions of the Code are sufficient basis for a prosecution relating to advertising offshore online gaming and betting. In British Columbia, the Integrated Illegal Gaming Enforcement Team of the Royal Canadian Mounted Police (the “RCMP”) is investigating ways to stop the advertising of online gaming.  Rather than prosecute media outlets under the Code, the RCMP is working with the federal authority that regulates radio and television licensing, the Canadian Radio-television and Telecommunications Commission (“CRTC”) to bring pressure to bear on TV and radio stations that carry the advertisements.  By seeking to enforce an administrative ban against the advertising of online gaming, law enforcement demonstrates that it is not sure of its ability to obtain convictions based on the wording of the Code provisions relating to the advertising of gaming. 

The Code currently provides for a number of prohibitions relating to the advertising of gaming and betting:

(i)               Advertising of sports betting services:  ss. 202(1)(h)

(ii)            Advertising of lotteries and games of chance:  ss. 206(1)(a)

(iii)          Other provisions:  ss. 202(1)(f), 202(1)(g), 202(1)(j)

(i)     Sports Betting.  Subsection 202(1)(h) of Code makes it an offence to advertise, print, publish, exhibit, post up or otherwise give notice of any offer, invitation or inducement to bet on, to guess or to foretell the result of a contest, or a result of or contingency relating to any contest.

The case law differentiates between “gaming,” the action of playing a game for stakes, and “betting,” placing stakes on the outcomes of events external to the bettors. Subsection 202(1)(h) is clearly aimed at advertising relating to a form of betting activity

(ii)    Lotteries and Games of Chance:  Subsection 206(1)(a) of the Code makes it an offence to make, print, advertise or publish, or cause or procure to be made, printed, advertised or published, any proposal, scheme or plan for advancing, lending, giving, selling or in any way disposing of any property by lots, cards, tickets or any mode of chance.

The case law clearly states that ss. 206(1)(a) (as well as (b), (c) and (d)) only apply where the “games” at issue are games of pure chance.

Advertisements and marketing campaigns that promote websites offering casino games of pure chance (i.e. roulette, lottery-style games) are unambiguously subject to ss. 206(1)(a) of the Code.  If the games played thereon involve the staking of real money, the application of ss. 206(1)(a) is clear.  However, where the games advertised involve any element of skill, however small, an offence under ss. 206(1)(a) is not made out.

(iii)   Other Provisions:  ss. 202(1)(h) and 206(1)(a) are the only provisions of Part VII of the Code that refer specifically to advertising.  However, there are a few other provisions which could be interpreted as applying to advertising, namely:

ss. 202(1)(g):     Makes it an offence to import or bring into Canada any information or writing that is intended or is likely to promote or be of use in gambling, book-making, pool-selling or betting on a horse-race, fight, game or sport.

This provision makes specific reference to importing material that is “intended…or likely to promote…gambling or betting.”  This provision would only apply where advertising and marketing materials or information were produced outside of Canada and then brought into Canada.  Where those preconditions are met, the provision could be used to prosecute advertising relating to both gaming (“gambling”) and betting online operations.

ss. 202(1)(f): Makes it an offence to print, provide or offer to print or provide information intended for use in connection with book-making, pool-selling or betting on any horse-race, fight, game or sport.

This provision lacks any explicit reference to information used to “promote” betting and/or gaming.  That fact makes it difficult to apply ss. 202(1)(f) to advertising or marketing activities.  Penal statutes are strictly interpreted by the court, with any uncertainty being decided in favour of the accused.  By comparing ss. 202(1)(f) with ss. 202(1)(g), a court would likely be compelled to assign some meaning to the absence of language forbidding promotional activities in the former provision.

ss. 202(1)(i):  Makes it an offence to send, transmit, deliver or receive messages by radio, telegraph, telephone, mail or express that convey information relating to book-making, pool-selling or betting or wagering, or that are intended to assist in those activities.

The language of this provision indicates that it is applicable to betting only, not gaming.  The  The forms of media specifically named in ss. 202(1)(i) reflect the length of time since the Federal government last considered the provisions of section 202 of the Code: television isn’t mentioned, let alone the Internet. 

Like ss. 202(1)(f), ss. 202(1)(i) lacks any explicit reference to information used to “promote” betting, referring instead to information “relating to” or “intended to assist in” betting activities.  Again, when the language of ss. 202(1)(i) is compared with that of ss. 202(1)(g), we find that some meaning should be assigned to the absence of language forbidding promotional activities.  This should be sufficient to remove advertising and marketing from the purview of ss. 202(1)(i).

Under the common law, gambling requires three elements:  risk, reward and consideration.  The common law definition has been imported into Part VII of the Code, such that if any one of these three elements is absent from an activity, it cannot form the basis for a prosecution.

This has given rise to the offering of “play money” gaming sites to Canadians, particularly with respect to poker sites.  Such an offering requires no “consideration” to play, since the players court no risk of loss, and therefore there is no gambling, and the Code is not violated.

Telecaster, the gatekeeper of propriety in TV ads, accepts that “play money” sites are legal and advertising them is similarly legal, subject to certain conditions.  Most notably, “play money” sites cannot provide links or “pop-up” ads that direct players to “real money” sites.  This is important, as the “play money” sites are without exception operated by same entities that operate “real money” sites.  The “play money” site usually uses the same name as the “real money” site, but for the use of a “.net” or “.tv” suffix in place of the “real money” site’s “.com” suffix.

As well, Telecaster requires that there be no prizes awarded to players on a “play money” site.  This goes well beyond what the law requires, and arises from an erroneous interpretation of the law.  In effect, Telecaster is requiring that two elements (reward and consideration) be removed from the game, when the law merely requires the removal of either one of these elements.  So long as there is no consideration for playing, and no risk of loss to the players, there is nothing in the Code that prohibits offering prizes for playing in the “play money” games.

The “Play money” sites provide their operators with the benefit of operating a “play money” site is that it provides the opportunity for the operator to compile a list of persons who are already interested in gaming.  Using this list, a directed marketing campaign can be used to interest these persons in playing for real money on the “.com” site.

However, it would be very difficult for a Crown prosecutor to use these ulterior motives to attribute criminal intentions to the Canadian marketer / advertiser, who is not directly advertising the “real money” site.  That said, Canadian-based marketers and advertisers should ensure that they are not knowingly helping to market a “real money” site to people who were “targeted” through their use of a “play money” site, to avoid having their activities give rise to any “aiding and abetting” offences under the Code.

If prosecutions related to advertising gaming and betting must be based on either ss. 202(1)(h) (for sports books) or ss. 206(1)(a) (for lotteries and games of chance), it is arguable that poker falls into a “loophole” in the Code insofar as advertising is concerned.  Not every media outlet is comfortable relying on this loophole.

Case law has repeatedly held that poker is a game of mixed skill and chance.  Since ss. 206(1)(a) can only be applied to games of pure chance, with no element of skill, and ss. 202(1)(b) is limited to betting on sports, the Crown could not comfortably rely on either provision in seeking to prosecute the advertising of a “real money” poker site.

While “cards” are specifically cited in ss. 206(1)(a) as a prohibited method of disposing of property, a recent Ontario case indicated that even where “cards” are used in disposing of property, they must be used in course of a game of pure chance in order to create an offence against a provision of s. 206 (R. v. Shabaquay, [2004])

Therefore, to prosecute advertisement of a site devoted entirely to poker, the Crown would have to use one of the provisions that does not specifically refer to advertising.  For the reasons stated before, this would be an uncertain proposition for the prosecutor.

Pursuant to ss. 202(1)(h), it is clearly illegal to operate any kind of advertising or marketing campaign relating to an online sports book in Canada.  There is no ambiguity in language of the Code in this case, nor does the nature of sports betting lend itself to the alternative of using “play money” sites.

Nonetheless, many Canadian media outlets accept ads for online sports books:  in print (i.e. newspapers), radio (certain sports-oriented radio stations), and on signage.

“Bowmans.com,” an offshore online sports betting operation has taken a particularly aggressive approach to marketing its services.  For many years, Bowmans advertised on radio stations in Canada.  In October 2004, Bowmans took a far bigger step, announcing a co-promotional deal with the Canadian Football League (“CFL”).  Under the deal, Bowmans gets a comprehensive in-stadium advertising program throughout the CFL post-season play, a cross-promotional free game offered on CFL and Bowmans websites.  As well, a number of individual CFL teams provide Bowmans with advertising signage in their stadiums during the regular season, and as of 2005 Bowmans was employing a marketing consultant based in Toronto, Canada.

The minimalist signage advertising used at CFL events merely reads “Bowmans.com”, which gives rise to a further legal question:  by simply posting a URL, has one given readers of the sign notice of any offer to bet?  There is insufficient case law under ss. 202(1)(h) of the Code to give a definitive answer to that question, which could certainly form part of a defence to a charge.

In November 2005, the British Columbia Lottery Corporation (the “BCLC”) tried to get the CFL to ban Bowmans from having any presence at league-sponsored events during the CFL championship game, the Grey Cup.  It should be noted that the BCLC had begun offering online sports betting sanctioned under the Code.  The BCLC’s effort failed, and in the end, over 2 million Canadians who watched the Grey Cup saw “Bowmans.com” emblazoned on the field during the game.

The relationship between the CFL and Bowmans remains a sore spot between the CFL and the provincial lottery commissions. Online sports books are in direct competition with those provincial lottery commissions that have begun offering their sports-betting service online.  Moreover, the online operators have a decided advantage over the “legal” government-run sports “lotteries,” in that the Code restricts the government sports betting offerings to “parlay” bets (bets on the outcome of multiple sporting events).  Canadians who wish to bet on single sporting events must either go online or fly to Las Vegas.  Bowmans’ deal with the CFL represents mainstream acceptance of online gaming and betting, potentially making it harder for the government to someday put the genie back in the bottle.

The RCMP denied that the BCLC filed an official criminal complaint in connection with the matter, but the RCMP in British Columbia continues to look for ways to stop the advertising of online gaming.  The RCMP’s Integrated Illegal Gaming Enforcement Team is currently pursuing ways to bring pressure to bear against radio and television stations that carry advertisements for offshore online gaming sites, ways that do not involve prosecutions under the Code.  For instance, they are attempting to have the federal regulatory authority that licenses radio and television stations crack down on licensees.  This “indirect” approach seems to indicate that the RCMP doesn’t believe the Code gives them the tools it needs to prosecute those media outlets under ss. 202(1)(h).

Much of the advertising of online gaming that goes on in Canada could be subject to prosecution; however, no one has been prosecuted for such activity, and the authors are aware of no evidence that law enforcement authorities consider the matter a priority.

Law enforcement is a provincial responsibility, and some provinces may take more interest than others.  The authors are aware that in Alberta, some media outlets have received police warnings to cease and desist.  Even in Alberta, such enforcement efforts are spotty, to say the least.

If law enforcement attitude were to shift to an attitude of attempting to obtain convictions using the existing provisions of the Code, it is likely that the first charged would be the media outlets that carried the advertisements and the marketing firms that direct the advertising campaigns.

One highly efficient and inexpensive way to market online gaming and betting sites is through the use of affiliate marketers.  Affiliates use their computer servers to direct traffic to gaming and betting sites (among others), and are paid commissions for the customers they direct to a site.

Where a Canadian resident uses a computer located in Canada for these purposes, directing traffic to online sports books, ss. 202(1)(h) may be violated:  giving people notice of offers, invitations and inducements to bet on outcomes or contingencies relating to “contests.” In directing traffic to online casinos that offer games of pure chance, ss. 206(1)(a) may be violated.    Where traffic is directed to online poker sites, the previously-mentioned “loophole” for games of mixed skill and chance may apply.

While the authors are aware of no arrests or warnings pursuant to the Code relating to affiliate marketers, it is an open question whether more active participation in directing traffic to such sites (i.e. meeting physically with potential customers) would “cross a line” whereby some law enforcement authorities would take notice.

The Canadian Charter of Rights and Freedoms guarantees “freedom of…expression, including freedom of the press and other media of communication” (ss. 2(b)), subject to “such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society” (ss. 1)

The courts have struck down laws that restrict advertising as unconstitutional in circumstances where the goods or services being advertised were themselves legal. On the other hand, criminal restrictions on communications for the purpose of engaging in prostitution have been justified under s. 1, as have the Code restrictions on “obscene publications.”

The advertising prohibitions in Part VII of the Code clearly infringe on s. 2(b) of the Charter.  If they were challenged on that basis, the court’s analysis would be focused upon whether that infringement is justifiable under s. 1:

(i)               Are the advertising prohibitions in Part VII of the Code designed to achieve an objective that is of sufficient importance to warrant overriding freedom of expression?

(ii)            If so, is there a rational connection between the criminal sanction and that objective?

(iii)          Is the impairment on expression minimal in light of the standard imposed?

(iv)          Is the criminal prohibition proportionate?  That is, how does the importance of the objective sought fare when balanced against the degree to which it infringes freedom of expression?

In cases where criminal restrictions on communications have been upheld, the Court found that the objective of the criminal provisions was avoiding harm to society.  Here, the intent of Part VII of the Code is not to ban the advertising of gaming and betting, but rather to restrict it to circumstances where the gaming and betting in question is licensed by the province.

It could be argued that the provisions in question are now being used not to ban harmful activity, but to protect a government monopoly over that activity.  If the court was receptive to this argument, the infringement might not be found justifiable.

In Ontario, a member of provincial parliament has introduced a private member’s bill that would purport to prohibit all forms of advertising relating to online gaming and betting, even that relating to “play money” sites.  While private member’s bills do not usually become law, there appears to be government support for this bill behind the scenes.

In the course of introducing this bill, the province has sent signals that the bill is meant to add to the Code provisions.  It reflects the belief also shown by the RCMP in British Columbia: that the Code does not contain the tools necessary to prosecute the advertising and marketing of online gaming.  The legal enforceability of a provincial law that seeks to rectify what the province sees as loopholes in the criminal law is highly questionable, as criminal law is the sole jurisdiction of the federal government.

Legal enforceability aside, the province of Ontario has to choose whether it will seek constructive engagement with those jurisdictions that licence online gaming and betting, or whether it will instead attack online gaming in the manner pioneered by the Bush Administration:  pursuing domestic advertisers.  The authors are unaware of any evidence indicating that this U.S. approach has resulted in any reduction in the demand for online gaming and betting services in the United States.  Time will tell if the supporters of this bill have evidence that their proposed legislation is rationally connected to its stated objective.  Either that evidence will be presented in the debate on the bill, or it may be disclosed in the event the bill becomes law, and is challenged on a constitutional basis.

Michael D. Lipton, Q.C. is a senior partner and head of the Gaming Law section of Elkind & Lipton LLP in Toronto, and a founding member and current President of The International Masters of Gaming Law. 

Kevin J. Weber is an associate and member of the Gaming Law section of Elkind & Lipton LLP.