“The next winner could be you!” “100% of OLG proceeds have been invested in Ontario.”1 Both are technically true; both are designed to portray government-run gambling as fun, harmless, and constructive. But they mask an unhealthy dependency. The slogans are a colourful façade that the province uses to cover a socially destructive addiction. And like any addiction, the government’s dependency ends up harming those it has a responsibility to help.
In this paper, we tell the story of Ontario’s involvement with gambling and explore how it got hooked. The state has not always been the leading dealer in gambling or user of the revenue it produces. In fact, gaming’s path from an illegal and suppressed activity to a legal one, and its eventual transmogrification into a lean, mean, revenue machine having the government’s full support and encouragement, was circuitous and filled with ironies and unintended consequences.
Recent provincial governments have pursued lottery and casino revenue with gusto, often overlooking or downplaying the problems that arise from their dependency on the billions that gambling provides to the provincial treasury. As our analysis of the economics of gambling revenue, and our review of the demographic data of Ontario’s lottery and gaming players show, the state’s gambling monopoly operates as a tax on the marginalized—preying on the poor and those who are playing hard to join them.
So what can be done about the government’s gambling problem? We offer a program for Ontario’s recovery, aimed at building a policy framework that enables the poor and builds good economic habits for government and citizens alike.
Given that OLG (Ontario Lottery and Gaming Corporation) profits are extracted disproportionately from those on the margins, gambling funds should not be lumped in with general tax revenue to be used the same way. Instead, we make the case for putting this money back in the hands of the poor. Direct redistribution to low-income households would be one way to accomplish this. Alternatively, the government could use OLG revenue to help the poor build savings. The sudden spike of layoffs created by the COVID-19 outbreak has made the need for savings more obvious than ever, with an unprecedented number of households facing an unexpected loss of income. The financial shock of the pandemic, and the almost complete decline of provincial revenues from gambling provide an unprecedented opportunity for the province to cut its addiction to OLG profits cold turkey and to rebuild its economy with structures that are healthy, just, and prosperous for all. Breaking the harmful cycle of dependency will not be easy, but the rewards of getting clean are well worth it. It’s time for Ontario to quit its bad gambling habit and pick up some good habits instead.
From Morality to Money-Making Monopoly: A Brief History of Gambling and the State
The history of gambling legislation in Ontario is long and complicated. Like many of our laws, its roots are found across the pond in England.2 The earliest prohibitions against various games set the tone for the state’s relationship to games of chance in the centuries that followed: gambling was a vice that the state had a responsibility to restrain among its population.3 These bans targeted the “inferior classes,” the prevailing sentiment being that “gaming was a diversion among gentlemen, but a pernicious vice among the poor.”4 It is worth noting that this attitude foreshadows our current situation: a poor person who spends money on lottery tickets is irresponsible, but a government that takes this money is being prudent. Even as gaming laws gradually shifted from banning gambling outright to regulating it, the system remained biased toward the rich: only the wealthy could afford licences to operate a gambling house.5
The next shift in gaming policy was the move from state control to state involvement. In 1569, the first lottery run by the English state was drawn for the repair of harbours. A slew of other state-run lotteries followed on both sides of the Atlantic, as did legislation that prevented all but the state from holding lotteries.6
By this period, the suppression of gambling was less a matter of maintaining public morality than maintenance of a government monopoly. The English government was involved in the sale of lottery tickets, dice, and playing cards, making money on both the sale of gambling services and the collection of fines for unlicensed gaming operations.7 Early Canada’s official stance on gambling was shaped by both the legislation and the moral ambivalence it inherited from Britain.8
Lotteries were a key way for cash-strapped colonies to finance major public projects: Canada set up its first state-run lottery to build a bridge over the Avon River in 1819.9 Gambling was not, however, without its opponents, the most vocal of which tended to hail from Protestant churches. Yet efforts to tighten gambling restrictions met fierce opposition from Francophones in Catholic Quebec, who resisted what they felt to be the imposition of English Protestant values.10
When the Criminal Code of Canada was first enacted in 1892, the “Offenses against Religion, Morals, and Public Convenience” section set strict limits on gambling, outlawing (at least officially) almost everything beyond informal private bets.11 Slowly but surely, a series of seemingly minor amendments loosened this legislation and facilitated the expansion of legal gambling into the twentieth century.12 Charitable and religious raffles were among the first to win exemptions from the gambling ban. Keeping with the theme that “gambling was acceptable for elites that possessed both money and ‘self control’ but was dangerous for working-class Canadians,” betting on horse races—the purview of the rich—was close behind.13 New restrictions on various games of chance were introduced in 1922 after a wartime gambling surge, though many of these games were given exemptions for agricultural fairs three years later. By 1938, permission to run gambling activities was extended to social clubs as well.14
These incremental adjustments paved the way for a major shift in the second half of the century. In 1969, prime minister Pierre Trudeau passed an omnibus bill that, among other things, permitted federal and provincial governments to hold lotteries and allowed “gambling at public places of amusement” with a provincial license.15 While shifting moral standards in Canadian society were working in the background, the immediate catalyst was a cash shortage: Quebec, desperate for new revenue to fund Expo 67 and the 1976 Montreal Olympics, had been urging Ottawa to allow provincial lotteries.16 After Trudeau’s 1969 changes, provincial gambling operations skyrocketed. Lotteries proved so lucrative, in fact, that federal and provincial governments spent the next decade fighting over who should receive the profits. The conflict was eventually settled with a compromise in 1985, when the Criminal Code was amended to give provinces full control of gambling in exchange for sending the federal government a portion of received revenue: $100 million for the 1988 Calgary Olympics, and a total of $24 million—indexed to inflation and divided according to each province’s respective share of sales—every year thereafter.17
With these changes to the Criminal Code in place, Ontario and other provinces could control the gambling within their respective jurisdictions. This was a critical turning point, providing a new way to pull in more cash without touching tax rates. This provided an enticing opportunity for provinces that lacked Ottawa’s level of control over corporate and personal taxes.18
Gaming was seen as a form of public entertainment, and the relatively modest profits returned by the Ontario Lottery Corporation (OLC), OLG’s predecessor, were invested in other forms of public entertainment. The Ontario Lottery Corporation Act, which created the OLC in 1975, limited the use of lottery proceeds “to the promotion and development of physical fitness, sports, recreational and cultural activities and facilities thereof.”19 When the province spent its first gambling cheque on a TVO expansion in 1980, the government made sure to point out that it was going to cover only the capital costs of the endeavour:
As honourable members know, the Ontario Lottery Corporation Act dedicates Lottario proceeds to cultural and recreational activities and facilities. This is the very first Lottario allocation that has been made. Frankly, I cannot think of a more useful way to spend the money. I would emphasize that only the one-time capital investment in this extension is coming from lottery proceeds. We will not be depending on lottery proceeds for the continuing operation of the new facilities.20
Subsequent years saw the province moving steadily, if imperceptibly, away from its “games for games” approach, and its commitment to use funds solely for capital expenses. Over time, the list of expenditures for gambling monies grew. In 1989, OLC legislation was amended to allow gambling profits to be used for hospitals.21 A few years later, “protection of the environment” was added to the list as well.22