Author: LegalEase Solutions
INTRODUCTION
Our client requires a review and summary of laws relating to the legality of an online gambling operation and online gambling venture advertising in Canada.
DISCUSSION
- Online Gambling
Online gambling is illegal in Canada, unless the gambling activity is operated by a provincial government. Part VII of the Canadian Criminal Code (“Code”) makes all activities related to operating or acting in support of a commercial betting enterprise an offence, unless it is an enterprise licensed by a provincial government. Federal law permits provincial governments to conduct and manage lotteries and games of chance that are operated on or through a computer, such as Internet casinos. However, the provincial governments cannot license private entities to engage in the same activities. Section 206 of the Canadian Criminal Code relates to offences in relation to lotteries and games of chance. Section 207 prescribes certain exceptions.
The relevant provisions of the Criminal Code are as follows:
206.(1) Everyone is guilty of an indictable offence and liable to imprisonment for a term not exceeding two years who
(a) makes, prints, advertises or publishes, or causes or procures 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 whatever;
(b) sells, barters, exchanges or otherwise disposes of, or causes or procures, or aids or assists in, the sale, barter, exchange or other disposal of, or offers for sale, barter or exchange, any lot, card, ticket or other means or device for advancing, lending, giving, selling or otherwise disposing of any property by lots, tickets or any mode of chance whatever;
(c) knowingly sends, transmits, mails, ships, delivers or allows to be sent, transmitted, mailed, shipped or delivered, or knowingly accepts for carriage or transport or conveys any article that is used or intended for use in carrying out any device, proposal, scheme or plan for advancing, lending, giving, selling or otherwise disposing of any property by any mode of chance whatever;
(d) conducts or manages any scheme, contrivance or operation of any kind for the purpose of determining who, or the holders of what lots, tickets, numbers or chances, are the winners of any property so proposed to be advanced, lent, given, sold or disposed of;
(e) conducts, manages or is a party to any scheme, contrivance or operation of any kind by which any person, on payment of any sum of money, or the giving of any valuable security, or by obligating himself to pay any sum of money or give any valuable security, shall become entitled under the scheme, contrivance or operation to receive from the person conducting or managing the scheme, contrivance or operation, or any other person, a larger sum of money or amount of valuable security than the sum or amount paid or given, or to be paid or given, by reason of the fact that other persons have paid or given, or obligated themselves to pay or give any sum of money or valuable security under the scheme, contrivance or operation;
(f) disposes of any goods, wares or merchandise by any game of chance or any game of mixed chance and skill in which the contestant or competitor pays money or other valuable consideration;
(g) induces any persons to stake or hazard any money or other valuable property or thing on the result of any dice game, three-card monte, punch board, coin table or on the operation of a wheel of fortune;
………………………………….. .. .. .
206.(4) Every one who buys, takes or receives a lot, ticket or other device mentioned in subsection (1) is guilty of an offence punishable on summary conviction.
………………………………………. .. .
207.(1) Notwithstanding any of the provisions of this Part relating to gaming and betting, it is lawful
(a) for the government of a province, either alone or in conjunction with the government of another province, to conduct and manage a lottery scheme in that province, or in that and the other province, in accordance with any law enacted by the legislature of that province;
(b) for a charitable or religious organization, pursuant to a license issued by the Lieutenant Governor in Council of a province or by such other person or authority in the province as may be specified by the Lieutenant Governor in Council thereof, to conduct and manage a lottery scheme in that province if the proceeds from the lottery scheme are used for a charitable or religious object or purpose;
(c) for the board of a fair or of an exhibition or an operator of a concession leased by that board, to conduct and manage a lottery scheme in a province where the Lieutenant Governor in Council of the province or such other person or authority in the province as may be specified by the Lieutenant Governor in Council thereof has
(i) designated that fair or exhibition as a fair or exhibition where a lottery scheme may be conducted and managed, and
(ii) issued a licence for the conduct and management of a lottery scheme to that board or operator;
(d) for any person, pursuant to a license issued by the Lieutenant Governor in Council of a province or by such other person or authority in the province as may be specified by the Lieutenant Governor in Council thereof, to conduct and manage a lottery scheme at a public place of amusement in that province if
(i) the amount or value of each prize awarded does not exceed five hundred dollars, and
(ii) the money or other valuable consideration paid to secure a chance to win a prize does not exceed two dollars;
(e) for the government of a province to agree with the government of another province that lots, cards or tickets in relation to a lottery scheme that is by any of paragraphs (a) to (d) authorized to be conducted and managed in [*24] that other province may be sold in the province;
(f) for any person, pursuant to a licence issued by the Lieutenant Governor in Council of a province or such other person or authority in the province as may be designated by the Lieutenant Governor in Council thereof, to conduct and manage in the province a lottery scheme that is authorized to be conducted and managed in one or more other provinces where the authority by which the lottery scheme was first authorized to be conducted and managed consents thereto;
(g) for any person, for the purpose of a lottery scheme that is lawful in a province under any of paragraphs (a) to (f), to do anything in the province, in accordance with the applicable law or licence, that is required for the conduct, management or operation of the lottery scheme or for the person to participate in the scheme; and
(h) for any person to make or print anywhere in Canada or to cause to be made or printed anywhere in Canada anything relating to gaming and betting that is to be used in a place where it is or would, if certain conditions provided by law are met, be lawful to use such a thing, or to send, transmit, mail, ship, deliver or allow to be sent, transmitted, mailed, shipped or delivered or to accept for carriage or transport or convey any such thing where the destination thereof is such a place.
.. .. . ………………………
207.(3) Every one who, for the purposes of a lottery scheme, does anything that is not authorized by or pursuant to a provision of this section
(a) in the case of the conduct, management or operation of that lottery scheme,
(i) is guilty of an indictable offence and liable to imprisonment for a term not exceeding two years, or
(ii) is guilty of an offence punishable on summary conviction; or
(b) in the case of participating in that lottery scheme, is guilty of an offence punishable on summary conviction.
207.(4) In this section, ‘lottery scheme’ means a game or any proposal, scheme, plan, means, device, contrivance or operation described in any of paragraphs 206(1(a) to (g), whether or not it involves betting, pool selling or a pool system of betting other than … …………………..
(c) for the purposes of paragraphs (1)(b) to (f), a game or proposal, scheme, plan, means, device, contrivance or operation described in any of paragraphs 206(1)(a) to (g) that is operated on or through a computer, video device or slot machine, within the meaning of subsection 198(3), or a dice game.
Although s. 207 allows exceptions to s. 206, it too contains a broad prohibition. Subsection 207(3) makes it an offence to do anything for the purpose of the conduct, management, operation of, or participation in a lottery scheme unless the doing of it is authorized by or pursuant to some provision of 207. Thus, even permitted lotteries must strictly adhere to the limits imposed by the terms and conditions of s. 207.
This issue of express prohibitions and exceptions came for consideration in the Prince Edward Island Supreme Court in the matter of, [Indexed as: Reference re: Earth Future Lottery and Criminal Code s. 207], 2002 W.C.B.J. LEXIS 1306 (W.C.B.J. 2002). Section 207 1(b) allows a charitable or religious organization, pursuant to a license issued by the Lieutenant Governor in Council of a province to conduct and manage a lottery scheme in that province if the proceeds from the lottery scheme are used for a charitable or religious object or purpose. This was a reference by Lieutenant Governor in Council of PEI pursuant to s. 18 of the Supreme Court Act (P.E.I.) for a determination as to whether a proposed lottery scheme would violate s. 207 of the Criminal Code. The proposed lottery was an internet lottery scheme and a license had been obtained from the province to operate it. The lottery or scheme would be operated through a computer.
The Court held that the lottery constituted a game, proposal, scheme, plans, means, device, contrivance or operation described in s-s. 206(1)(b) of the Criminal Code. It was designed so that computers with internet connections will be the exclusive means through which almost all gaming transactions would be conducted. This would create a problem.
Subsection 207(4) of the Code defines “lottery scheme” for the purpose of 207(1)(b). The definition specifically excludes a game, or proposal, scheme, plan, means, device, contrivance or operation described in s-s 206(1)(b) that is “operated on or through a computer.” As described, the Earth Future Lottery would surely constitute such a scheme. Computers would be the exclusive means of accessing it, of purchasing chances and of obtaining a potential winning number. The scheme as described to the court also contemplates the use of computers to advertise and promote the Earth Future Lottery, to provide confirmation of the issuance and registration of ticket numbers, and in some cases to deliver prizes. In fact, without the use of computers the Earth Future Lottery would not be viable. Hence, it is not lawful under s-s. 207(1)(b) of the Criminal Code .
Id. at 37,38.
Many gambling activities are permitted in Canada because of section 207 of the Code, which creates exceptions to the overall ban. Section 207(1)(a) permits “lottery schemes” that are “conducted and managed” by provincial governments. A second exception is carved out for provincially licensed lottery schemes conducted by charitable organizations, exhibition associations, and in certain circumstances, private individuals (sections 207(1)(b-d)).
According to section 207(4)(c), lottery schemes “operated on or through a computer, video device or slot machine” are not permitted unless they are conducted and managed under the exception in section 207(1)(a) — the provincial government exception. Under the current legal framework, Internet gambling would fall under section 207(4)(c), and would therefore only be legal if conducted and managed by a provincial government.
The principle that only the provincial governments may legally conduct and manage lotteries and games of chance operated on or through a computer was reinforced by the criminal prosecution of Starnet Communications International Inc in the case of Regina v. Starnet Communications International Inc. (August 17, 2001), Vancouver 125795-1 (B.C.S.C.). A copy of the case was not found on Lexis, but the case has been discussed in some detail on the website of the law firm Elkind & Lipton LLP[1].
- Advertising of Online Gambling
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. While “cards” are specifically cited in ss. 206(1)(a) as a prohibited method of disposing of property, an Ontario case indicates 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] O.J. No. 2357 (ON.C. 2004).
Thus 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) may not lie.
Sections 202 (1)(f) and (i) of the Code could have the effect of making advertising efforts for an unlicensed gaming operation an offence. Subsection (f) makes it an offence to print, provide or offer to print or provide information intended for use in connection with any game, whether or not it takes place in or outside of Canada. Subsection (i) makes it an offence to willfully and knowingly send any message that conveys any information relating to betting or wagering or is intended to assist in it. These two Sections address various forms of conveying information relating to unlicensed gaming and betting within Canada. The law as it relates to these offences is not well developed and it is difficult to predict with any certainty what would be considered an offence. However, if the gambling activity were viewed as illegal, the provision of information relating to it would also likely be an offence. Thus, any communication of information in Canada relating to an unlicensed online gambling operation could be an offence under the Code. This may include information on a website or communicated online though not expressly stated in the section.
Section 202(1)(j) of the Code makes it an offence to aid or assist “in any manner in anything that is an offence under this section”. There is no case law applying this section of the Code. Most activities that surround illegal gambling and betting are covered in the previous sections. This section is broad and is most likely intended to catch other activities surrounding unlicensed gambling and betting, that are not covered in the preceding sections.
The Code does exempt certain types of advertising from prosecution which are intended to be realized in a location/jurisdiction where such gaming would be permitted, i.e. outside the jurisdiction of Canada. Section 207(1)(h) of the Code reads:
Notwithstanding any of the provisions of this Part relating to gaming and betting, it is lawful
(h) for any person to make or print anywhere in Canada or to cause to be made or printed anywhere in Canada anything relating to gaming and betting that is to be used in a place where it is or would, if certain conditions provided by law are met, be lawful to use such a thing, or to send, transmit, mail, ship, deliver or allow to be sent, transmitted, mailed, shipped or delivered or to accept for carriage or transport or convey any such thing where the destination thereof is such a place.
Thus Section 207(1)(h) creates an exemption for the printing of information in Canada relating to gaming and betting that is to be exported and used in a place where it is legal to do so.
CONCLUSION
- The Code prohibits private entities from engaging in any gaming activities without a license from a provincial government. Even those entities that have a license are not permitted to engage in online gaming, as s. 207(4) of the Code excludes such gaming from its purview.
- Advertising for online gaming operations is likewise prohibited in the Code both by express language to that effect and general language which makes it an offence to aid or assist “in any manner in anything that is an offence under this section”. Case law on these issues is sparse leaving open the possibility that courts may, in the future, interpret those provisions of the Code in a way favorable to advertising. However no such case law currently exists.
[1] Discussion of case can be found at http://www.elkindlipton.com/pub_online_gaming_dev.html
