Canada: Ontario Gaming Regulator Launches Phase Two Of Electronic Raffles Roll-Out, Offering Increased Fundraising Opportunities For Licensed Non-Profits

On January 18, 2019, the Government of Ontario announced changes to its raffle licensing framework, which provides more options and greater flexibility to Ontario charities and religious organizations wishing to fundraise through online raffles. This is in line with the government's intention to reduce the administrative burden on Ontario's non-profits.

Canadian Lottery Scheme

Raffles, bingo events, 50/50 draws and other social gaming events are all common fundraising mechanisms that many charities and non-profit organizations use as a fun and easy way to generate revenue. However, some charities and non-profit organizations may not be aware that lottery schemes and other gaming activities fall within the scope of the Criminal Code (Canada) (the "Code"), and participating in an unlawful lottery scheme is an indictable offence under the Code.

Section 207(1)(b) of the Code provides an exemption from the general prohibition against gambling, allowing eligible charitable and religious organizations to conduct and manage lottery schemes under a licence issued by the appropriate authority. This means that charities and non-profits are prohibited from conducting or managing a lottery scheme, unless they have applied for and been issued a licence by the appropriate authority.

A "lottery scheme" is described as any scheme, permitted by a licence under the Code, that has the following three components: a prize, a chance (to win the prize), and consideration or a fee. Examples include raffles, bingos, wheels of fortune, 50/50, break open tickets, and other social gaming events.

Beyond the Code's provisions, the administration of gaming activities falls under provincial jurisdiction. Each province has their own set of laws and regulations surrounding lottery schemes and the issuance of licences. Across Canada, the provinces have generally delegated this power to the various provincial alcohol, liquor and gaming authoritative bodies, which include:

Alcohol and Gaming Commission of Ontario

In Ontario, the Alcohol and Gaming Commission of Ontario ("AGCO") is responsible for administering the charitable lottery licensing program. The AGCO issues rules for each type of licensed lottery event, and together with municipal councils, issues licences for charitable gaming events to eligible organizations. Depending on what an Ontario organization seeks to do and where, it will either turn to the AGCO or the local municipality to obtain a licence. Generally, the amount of money to be awarded in prizes determines whether the raffle requires a municipal licence or a provincial licence. Where the total value of the prizes to be awarded for a raffle lottery exceeds $50,000, or where the total prize board for a bingo event exceeds $5,500, the AGCO (as opposed to the municipality) will issue the licence. Additionally, the AGCO is the only licensing authority that may issue licences for electronic raffles.

The licensing process in Ontario is set out below.

A. Eligibility (General)

To be eligible for a charitable lottery licence in Ontario, an organization must provide programs that fall within one of the four heads of charity, those being: (i) advancement of religion; (ii) advancement of education; (iii) relief of poverty; or (iv) other charitable purposes beneficial to the community. Although the AGCO does not require an organization to be a registered charity under the Income Tax Act (Canada), it will determine eligibility for a charitable lottery license based on the specific organization and its use of the proceeds from the lottery scheme. Additionally, the organization must: (i) have been in existence at least one year prior to the date it submits its application; (ii) have a place of business in Ontario; (iii) demonstrate that it provides charitable services in Ontario; and (iv) propose to use the proceeds for specific charitable purposes that benefit Ontario and its residents.

B. Lottery Licences

Provided an organization is eligible to obtain a licence, the licensing authority will confirm whether or not a licence is available for a proposed lottery scheme. There are many types of lottery schemes for which licences are available, including: charitable gaming event, regular and special bingo, super jackpot, break open tickets, raffle lottery, and electronic raffles. A description of each of these can be found here.

C. Electronic Raffles

Electronic raffles are characterized by the use of computers for the sale of tickets, the selection of winners, or the distribution of prizes in a licensed charity raffle. The AGCO began to permit electronic raffles as a part of an interim pilot project in 2016, and is expanding the permitted activities in phases.

During the first phase, the AGCO licensed electronic raffles aligned closely with the paper-based raffles permitted historically. These raffles included event-specific (one time) 50/50 raffles, and fixed-prize raffles with an available prize valued at over $50,000. The AGCO is now entering phase two of the roll-out, which will permit licensing for a wider variety of electronic raffles, accessible both in person and online, including 50/50 draws, "Catch the Ace", and fixed-prize draws. Further, people of legal age in Ontario will also be able to purchase raffle tickets during a game or event, even if they are not at the event in person, and licensed organizations will be able to pick winners and award prizes electronically through online platforms. The regulatory changes to electronic raffles also allow licensees to sell raffle tickets over multiple days (e.g., during the season of a specific sport), and at multiple locations.

To date, the AGCO has approved four electronic raffle suppliers to supply electronic raffle platforms. For the first time, under the expanded regulations, licensed organizations have the opportunity to develop their own electronic raffle solutions. These solutions, including sales platforms, will be subject to review and approval by the AGCO's Technical and Laboratory Services.

D. Submitting an Application

For lottery events licensed by the AGCO, organizations applying for the first time must submit their charitable lottery licence applications at least forty-five (45) days in advance of the event. Organizations applying to the AGCO for a second or subsequent time, must submit their charitable lottery licence applications at least thirty (30) days prior to the date of the event. Organizations are advised to provide as much lead time as possible. Information on conducting and managing lottery events can be found in the AGCO's Lottery Licensing Policy Manual.

If the application is to be issued by a municipality, you must contact the municipality directly.

As the AGCO continues to expand the regulatory framework governing electronic raffles, Ontario non-profits should consider these new licensing options in their future fundraising campaigns. If your organization is considering applying for a charitable lottery licence, one of our lottery and gaming experts would be pleased to assist.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.