As Premier Doug Ford's government prepares to open up the online gambling market in Ontario, there's a warning that its plans could see the province and municipalities lose out on hundreds of millions of dollars in annual revenue.

That warning is in a new report by a gambling industry consulting firm, obtained by CBC News. The report was prepared for Great Canadian Gaming, the company with the largest share of Ontario's casino market. 

Even though Ontario will have a new source of revenue from taxing the newly regulated online gaming sites, the report argues that the province will end up short-changed. That's because it predicts a big shift in spending from land-based casinos to internet gaming. 

Because the tax rate Ontario is expected to impose on online gambling sites is much lower than the percentage the government takes from casino spending, the report concludes that the province stands to lose out on $550 million in annual revenue for a total of $2.8 billion over the next five years. 

Pre-pandemic, annual provincial revenues from lottery and gambling amounted to as much as $2.5 billion.    

But companies involved in the online gaming sector say the report's conclusions are flawed. 

In particular, they question the key assumption underpinning the report: that existing casino customers will suddenly start spending much less of their money in casinos and more on internet gambling websites that are already available to them.

"When the regulated market opens in Ontario, nothing is going to change in respect to players' entertainment habits," said Jeffrey Haas, senior vice-president of DraftKings Inc., which offers U.S.-based online sports betting and online casino products. 

"People who are playing in online casinos and online sportsbooks and online poker rooms will continue to do so, except they're going to go from playing offshore to onshore," he said in an interview. "And anybody who continues to walk into real casinos in order to play games there will continue to do so."

Officials from Great Canadian Gaming declined CBC's request for an interview about the report's findings, but CEO Tony Rodio provided a statement.

"The report includes critical learnings from other jurisdictions that introduced iGaming and cannibalized land-based operators in the process," he said. "While we support iGaming in principle, the Ontario government needs to take the time to get this right."

The report by HLT Advisory Inc., titled Ontario Gaming Market Assessment, is labelled "Private & Confidential" and dated Jan. 11. 

It says the government's proposed "open licence" model for e-gaming will result in online sites more than tripling their share of Ontario's overall gambling market, estimated at around $7 billion a year.  

"If an open-licence e-gaming model is implemented in Ontario, e-casino would capture a significant share of the total casino market," says the report, basing that conclusion largely on the U.K.'s experience after opening its e-gaming market in 2005. 

Land-based casinos in Ontario must currently hand over 55 per cent of net gambling proceeds to the province. The Ford government has yet to announce what percentage it will take from regulated online gambling sites, but the report bases its assumptions on a 20 per cent tax rate, which industry sources say is likely accurate. 

Finance Minister Peter Bethlenfalvy, who is responsible for Ontario's internet gambling regime, declined a request for an interview. 

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