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Ontario Lottery and Gaming Corporation (OLG) Issue Note

Internet Gaming

ISSUE

Why is OLG seeking to offer online internet gaming?

SUGGESTED RESPONSE

• OLG will proceed in a prudent manner to provide Ontarians with a socially responsible, secure and entertaining internet gaming site as opposed to the unregulated alternatives out there now.

• We are seeking to launch the site in 2012, and we will consult broadly to allow us to benefit from best practices and policies in use worldwide.

• Across Canada and around the world, online commerce is part of our everyday lives and OLG is excited to start the consultation process for online gaming and growing its marketplace in the future.

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SUPPLEMENTARY ISSUE

Aren't you fearful that internet gaming will cannibalize the operation of OLG slot and casino sites?

SUGGESTED RESPONSE

• Over the next 18 months, we will be consulting widely to learn from the best operators worldwide and to review best practices so that OLG's program is absolutely the best it can be.

• The possibility for cannibalization of OLG's existing Slot and Casino sites is something that we will be looking at very carefully.

• OLG is following many other jurisdictions already taking part in online gaming.

• With more than 1,800 online gaming sites worldwide, Ontarians currently hold an estimated 400,000 to 500,000 accounts with grey-market providers. These mostly offshore providers are unregulated by Ontario and proceeds do not benefit the people, or the economy of Ontario.

• E-commerce and the movement to online business is a reality across all sectors of the economy, which makes this the right time for OLG to explore internet gaming.

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SUPPLEMENTARY ISSUE

Why should Ontarians trust OLG to get this right, especially after what happened in Be?

SUGGESTED RESPONSE

• OLG is engaging in a long, thorough 18 month process to learn about best in class practices from other jurisdictions, responsible gaming stakeholders and private sector service providers.

• We will take our time, to listen and learn from the best to deliver a socially responsible secure Internet gaming program in 2012.

SUPPLEMENTARY ISSUE '

Isn't internet gaming just a money grab to pay for the province's huge deficit?

SUGGESTED RESPONSE

• E-commerce is part of our everyday lives, from online banking to e-media, something with which I am very familiar.

• OLG wants to be in line with what's happening online and it's time OLG gets into internet gaming. This is an opportunity to help shape the evolution of internet gaming.

• Expanding OLG's brand into online gaming will provide economic benefits for all Ontarians because that's OLG's mandate.

• The revenue generated by OLG goes to paying for things that matter most to Ontarians - health care, education and community programs.

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CURRENT STATUS

On Tuesday, August 10, 2010, Minister Dwight Duncan and OLG Chair Paul Godfrey announced that OLG will be exploring the area of internet gaming with a view to offer the public an opportunity to play OLG games in 2012.

BACKGROUND

Jurisdictions in Canada including British Columbia, the Atlantic Provinces, and many European Union states including the United Kingdom, The Netherlands, France and Sweden, already allow regulated online gaming.

Responsible Internet Gaming

Internet gaming presents a wide range of responsibilities for OLG in order to produce a socially responsible and secure online gaming system.

Player Protection

• OLG will undergo a prudent, rigorous process to determine and ultimately incorporate best in class practices and technology.

• OLG will leverage lessons learned in the last 3 years in the area of Player Protection and Data Analysis to combat potential fraud.

OLG is subject to and strictly adheres to the Freedom of Information and Protection of Privacy Act (FIPPA) in order to maintain confidentiality and the protection of personal privacy.

Responsible Gaming Tools

• The need to register for internet gaming provides one of the most controlled gaming environments, primarily due to the ability to identify each player, track their play and maintain data on individual players.

• Support Tools allow for maximum player self-control and can optimize OLG's interactions with players who may be at-risk.

OLG will offer age and identity verification software, as well as security software, to ensure responsible gaming policies are enforced.

Player Requirements

• Players will be required to register for play. OLG player data will adhere to strict privacy and security policies in consultation with the Ontario Privacy Commissioner's office.

• Players will be able to be reminded of 'red flag' behavior by responsible gaming tools built into the online site and players will also be offered other responsible gaming information online.

• OLG's responsible gaming tools will focus on encouraging normal and at risk players to maintain healthy player behaviour.

Players will be asked to set maximum money and time-per-session limits when their online session begins.

• Players will be encouraged to understand and manage their play, to take a break and to get help if needed.

Players will be directed toward free treatment services with the appropriate resources.

Player will have the opportunity to self-exclude from playing online. .

Resources

OLG will be partnering with Centre of Addiction and Mental Health (CAMH) to offer online counseling, which will be the first in the world for internet gaming.

• OLG will be able to offer online chats about responsible gaming, links to resources in each player's community in Ontario and links to other online gaming help resources.

• OLG will work with responsible gaming organizations in communities and with parents to help provide tools to educate young adults, in addition to age verification software.

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Internet Gaming Worldwide

Internet Gaming Laws in Other Countries

Canada: Under section 207.1(a) of the Criminal Code of Canada, only a Province or its designated agency may legally conduct any gambling activities that involve electronic devices. Internet gaming operators are unable to conduct operations in Canada, or to advertise their "play-for-money" sites. However, they continue to advertise "play-forfree" sites extensively, and Canadians spend an estimated $1 billion annually at a range of unregulated gaming sites. While these sites are generally regulated and licenced by a recognized authority somewhere in the world, only British Columbia Lottery Corporation (BCLC) and Atlantic Lottery Corporation (ALC) have so far created a licenced-inCanada, operated-in-Canada solution for Canadian players. Quebec has announced it will be offering internet gaming in the near future.

European Union: A majority of EU states license and regulate online gaming. In fact, it's common practice that this business is regulated and taxed. Countries have set up a regulatory regime that requires operators to obtain specific licenses and follow specific rules about online-gambling practices.

The Netherlands: Online casinos are legal but the Dutch Gaming Act does not allow Dutch nationals to take part in online casino games operated by a company which does not have a Dutch license.

The United Kingdom: UK legislation allows for online gaming and allows foreign operators to provide games for UK citizens. Operators are required to have approval from a UK or approved foreign regulator (e.g. Alderney)

Denmark: Legislation allows for online gaming, and allows foreign operators to provide games if they secure a licence and pay fees. In addition, Danske Spel (the state-owned gaming corporation) intends to operate their own gaming site, in partnership with a private operator.

Sweden: Svenska Spel is the state-owned corporation overseeing all gaming in Sweden, including casinos, game machines, sports betting, poker games, lotteries and internet gaming. Svenska Spel's online gaming portal currently offers everything from sports betting to poker, bingo, and lottery. Other operators are not regulated by the government, but continue to operate in a grey market, and retain about 70% of the online gaming market.

United States: Until 2006, the U.S. was the largest global market for online gaming, until it was prohibited through the Unlawful Internet Gambling Enforcement Act (UIGEA). In late July 2010, a bill to legalize online gaming passed the House Financial Services Committee, directing the U.S. Treasury Department to license and regulate internet gaming. Advocates in Congress hope the legislative process to approve online gaming will be complete by Fall 2010.

OLG Process

What is Internet Gaming?

• OLG will choose from a full range of offerings to be delivered on the internet, through an online site accessible via personal computers, laptops, and other internet-connected devices. The offerings could include lottery ticket sales, einstant tickets, interactive casino-style games (against the house), and peer-topeer games like poker.

• Today, Ontarians are estimated to have between 400,000 and 500,000 accounts with unregulated grey-market internet gaming providers, spending an estimated $400 million per year online, with none of the proceeds being channeled back to Ontario communities through the government of Ontario.

• These unregulated sites have no mandate to serve the Ontario public interest and are largely located offshore with virtually no government oversight.

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Potential Value

OLG now has the ability to catch up with several other Canadian and European jurisdictions in this emerging and fast growing global market of licensed online gaming.

A 2007 survey by eCommerce Online Gaming and Regulation Assurance found that the "Majority of 10,000 internet players surveyed are 'more likely to play' at sites with Responsible Gaming features than at 'less socially responsible' sites, because they help to build 'customer trust and contldence" in online gaming.

In 5 years of operation, internet gaming could potentially deliver $100 million or more in net profit to the province and potentially generate similar amount in spinoff economic activity.

It will create new highly skilled jobs in Ontario, both within OLG (to manage customer information, develop marketing, etc.) and with service providers/vendors (to operate the game servers, provide customer support, etc.).

How it is Delivered?

OLG will prepare a fully transparent and competitive RFI (Request For Information) to inform the development of an RFP (Request For Proposals). The competitive RFP process will identify potential service providers that will capture the maximum benefit for the province, create local jobs and economic activity, protection of player information, and adhere to strict codes of responsible gaming conduct.

OLG will consult and partner with independent Responsible Gaming groups to design and deliver program elements.

OLG will work with its regulator, the Alcohol and Gaming Commission of Ontario (AGCO), to ensure regulatory compliance, and with other jurisdictions to cooperate on the delivery of a cross-Canada platform for peer-to-peer games, including with British Columbia Lottery Corporation (BCLC), Atlantic Lottery Corporation (ALC) and Loto Quebec.

Contact:

Branch:

Phone:

Date:

Updated:

Approved by:

Rui Francisco Brum OLG, Issues 416-224-4941 August 11, 2010 September 9,2010 Allison Sparkes

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