TORONTO - Ontario is wading into online betting as more cash-strapped provinces and countries race to catch lucrative gambling revenues that are flowing outside their borders.

Canada's most populous province announced Tuesday that it will follow British Columbia's lead by launching its own online gambling business in 2012.

"On the weekend, I watched five poker television shows. I went and looked at a number of online sites from around the world," said Finance Minister Dwight Duncan.

"People want this. People enjoy gaming."

Canadians spend nearly $1 billion a year at unregulated gambling sites, with Ontario accounting for about $400 million of those revenues, according to the Ontario Lottery and Gaming Corp.

The province should get its share of that pie, even though it won't offer online gambling for another 18 months, said OLG chairman Paul Godfrey.

"Should we have started before? There will be people on both sides of that issue," he said.

"But the fact is, this is the best time to do it because at this point in time, these number of sites are growing worldwide. ... They're attracting people each and every day."

The United States, which is expected to lift its ban on Internet gambling this fall, "will be into it in no time," Godfrey added.

"They do have a lot of bills to pay, as we dread constantly," he said. "But the fact is, if we're going to retain Ontarians' money in Ontario, we better do it now."

The governing Liberals, who are also facing years of red ink, are eager to find new revenue streams to eliminate their massive deficit and fund expensive promises ahead of the 2011 election.

Premier Dalton McGuinty's legacy project of full-day kindergarten for four- and five-year-olds will cost an additional $5 billion alone a year once it's fully implemented.

Duncan already scrapped potentially lucrative plans to merge four of of the province's biggest Crown corporations into a so-called SuperCorp and sell off a stake to private investors, and is now headed for a showdown with public-sector unions over planned wage freezes.

With online gambling, the government estimates it could rake in $100 million annually within five years.

But it wants to avoid the blunders that befell B.C. when it launched its new online casino last month, Godfrey said.

A glitch that allowed dozens of gamblers to place bets with other users' money and, in some cases, see their personal information forced B.C. to shut down its revamped PlayNow.com site almost as soon as it was up and running.

The province's privacy watchdog is now investigating the breach, which tarnished B.C.'s image as the first jurisdiction in North America to offer legal, casino-style gambling online.

The Atlantic Lottery Corp.'s website, in operation since 2004, allows gamblers to buy lottery tickets and play interactive games, but not traditional card games, said ALC spokeswoman Tracy Kenney. The Atlantic provinces, Quebec and B.C. are working together on a common platform for online casino games.

Ontario was approached by the Atlantic provinces to share their software, but no decision has been made yet, said Duncan.

Saskatchwan is considering online gambling and will watch the other provinces closely, said Ken Cheveldayoff, minister responsible for the Saskatchewan Gaming Corporation.

"We know that it's happening, that Saskatchewan residents are participating in it," he said in a phone interview.

"There's revenue that the province could gain from being involved and being a regulator of it. But at the same time ... with online gaming it's hard to police exactly who is being involved and we want to make sure that it's those that are 18 and older and those that are responsible with their gambling."

Experts say online gambling operations are cheap to set up, but the social costs — particularly among Internet-savvy youth — can be devastating.

The Ontario Liberals, who recently banned drivers 21 and under from having any alcohol in their system, said raising the legal gambling age never entered into their discussions on Internet wagering.

The gambling announcement came as the province's ombudsman delivered a scathing report on the restructuring of hospital services in Hamilton and Niagara.It also came out after McGuinty was available for questions from reporters.

It seems the Liberals want to bury some bad news with headlines about online gambling, said NDP Leader Andrea Horwath.

"Regardless of the timing, I think it's a big mistake," she said.

Online betting will appeal to gambling addicts and youth, Horwath added.

"In both cases, we already have a problem," she said. "Why make it worse?"

- With files from Jennifer Graham in Regina.