Will You Pay More Taxes With Ontario Mobile Sports Betting?

Written By Evan Scrimshaw on January 10, 2022

One of the advantages Canadian bettors have always had is the way gambling winnings are taxed versus in the United States, or more precisely the lack of taxation. Be it daily fantasy winnings or grey market sports betting winning, there is currently no tax required for Canadians. But with potential Ontario sports betting taxes, there’s been some concerns about whether that might be under risk.

So let’s go through the implications for bettors.

What Are The Current Laws Around Ontario Sports Betting Taxes?

So long as you should not be expected to profit, gamblers in Canada are deemed, for tax purposes, amateurs, and therefore their Ontario mobile sports betting winnings are not subject to taxation.

If one were to be a professional gambler – a status almost never afforded, except to a handful of poker players – then they would be taxed, but for the average Ontarian, their betting or fantasy winnings aren’t subject to any tax.

Have The Tax Laws Been Changed?

No.

All that legalization has done is strip away the (never-enforced) Federal prohibition on single-game sports betting, and has made no impact on tax laws or enforcement, nor has any Federal politician singled any intention to do so.

Additionally, the provincial government of Ontario has made no effort to change provincial laws concerning what is and isn’t “income” for tax purposes, nor have either of the main opposition parties. Nothing is going to change in terms of bettor’s tax bills.

Why Is There Talk Of Increased Government Revenue Then?

What’s at issue here isn’t taxing bettors, but taxing operators on their revenue once they enter the market.
There’s been a lot of talk from politicians in Ontario about what the boon in legal sports betting could provide to provincial finances, especially after lean years of the pandemic, but that has led to speculation that the tax advantage Canadian bettors have had for years might go away.

The tax on operators could, in theory, be passed onto consumers in the form of increased holds per bet from operators, but with the rush of players expected to enter Ontario, and the established presence of the grey market players, operators won’t be able to push consumers in that way.

Any operator that increased holds to make up for the tax they’ll have to pay would lose customers to a book offering lower rake, and that means that any risk that legalization would end up being a negative compared to the current grey market status quo can be ignored.

Why Is This Important?

The economics of betting are entirely different if the value of any potential profits are taxed, and it increases the actual profitability of bets compared to Americans who make the same amount of pre-tax dollars.
The risk that legalization could end up being a backdoor to the taxation of lottery and gaming has been voiced repeatedly, but there is nothing to suggest anything could come of it.

Only the federal government could decide to change the definitions for Ontario sports betting taxes, and the government has no intention of doing so. Not only that, the lack of majority in the Canadian Parliament would require two parties to vote to raise taxes on small dollar bettors, which would not go over well with their voters.

The tax advantage that makes betting and fantasy more profitable for Canadians is not at any risk, and Ontarians looking at the prospects of legalization can rest easy that one of the oft-mooted potential downsides will not be coming through, and that they will not be forced to pay tax on any winnings even after the full benefits of legalization are recognized.

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