TORONTO - Cash-strapped Ontario is placing its bets on a plan to boost gambling revenues that would see a new casino in the Toronto area and lottery tickets sold online and at the local Wal-Mart within five years.

The governing Liberals, who are facing a $16-billion deficit this year, gave the green light Monday to the Ontario Lottery and Gaming Corp.'s plan to "modernize" gambling and add $1.3 billion a year to provincial coffers.

The Crown corporation plans to sell lottery tickets over the Internet and at checkout lanes in grocery and big-box stores, rather than a single customer-service station, said OLG chairman Paul Godfrey.

"Lottery tickets could be in drug stores, multi-lane stores -- the Wal-Marts, the Costcos of the world," he said.

Lottery terminals, which are also found in many convenience stores, could even be used to sell phone cards, gift cards and iTunes products, the OLG said.

It will also close or relocate "underperforming" gaming facilities in favour of opening new ones closer to potential customers, including Toronto, and expand slots beyond racetracks.

On the chopping block is a revenue-sharing agreement with racetracks that gives them a cut of the slot profits, amounting to $345 million a year. The horseracing industry has warned the move will put thousands of people out of work.

Ontario needs to modernize gambling because offshore gaming websites, plummeting U.S. traffic and increased competition in American states are taking a bite out of OLG's revenues -- almost $2 billion of which goes to the province each year, Godfrey said.

According to OLG, profits from gaming facilities close to the U.S. border have dropped from $800 million to $100 million over the past decade. And lottery tickets sales are beginning to plateau, largely because of a decline in players under the age of 45.

It said the new measures will bring in an extra $4.6 billion over six years, create 2,300 new jobs in the gaming industry and another 4,000 service industry jobs at hotels, restaurants, entertainment and retail industries.

"It's about jobs, and it's about updating a Crown corporation that -- as we pointed out -- has a strategy that was designed in the early 1990s in a very, very different world," said Finance Minister Dwight Duncan.

Quebec, B.C. and the Atlantic provinces allow their residents to buy lottery tickets online, and OLG also plans to expand private sector involvement, like Alberta and British Columbia.

Private operators will run all OLG facilities, take over the remaining 6,000 gaming employees who still work for OLG and finance the corporation's expansion from 27 facilities to as many as 29 by 2017-18.

Currently, only four facilities -- Casino Rama, Caesars Windsor, Niagara Fallsview and Great Blue Heron charity casino -- are privately run.

The OLG plans to turn to the private sector for a new casino in the Greater Toronto Area and perhaps in Ottawa, Godfrey said. It's also open to setting up a temporary casino until a more permanent facility is constructed.

Successive governments have mulled over proposals to build a Toronto casino, well before the Liberals took power in 2003.

While there are no plans to close casinos in border towns like Niagara and Windsor, Godfrey acknowleged a GTA casino could draw gamblers -- and the money they spend -- away from other OLG facilities.

"Yes, there will be some erosion," Godfrey said. "Will it cause their demise? I don't believe that."

Both Godfrey and Duncan were tight-lipped on where the GTA casino may be located, saying they'll need to talk first with municipal leaders and see what kind of pitch they get from companies who want to bid on the project.

However, Godfrey and other OLG officials had high praise for Woodbine racetrack in Toronto, noting that it's one of the busiest gaming floors in North America. Ontario Place, a 39-hectare park along Toronto's waterfront that has been shut down for redevelopment, could be another possible location.

Rod Phillips, OLG president and CEO, said 26 communities have already expressed interest in hosting a new casino.

But the New Democrats say gambling shouldn't be expanded in a province where so many people have suffered from addiction.

"We know the majority of people that play whatever sort of gambling, they lose," said NDP critic Rosario Marchese.

"And they want to balance the budget on the backs of desperate families who want to try to become millionaires. In my view, that's not the way to raise money."

The OLG said it will ramp up its support of education, research, prevention and treatment of problem gambling, which currently amounts to $52 million a year.

But Ontario also needs to move with the times, Godfrey said. OLG will have online gambling in 2013, but there's more to be done to remain competitive.

"The fact is, if we do not do anything at all -- we stand still -- the OLG's revenues will erode. The bottom line to this province will erode," Godfrey said.

"You've got to face the fact: standing still is not an option."