This is a topic I know a lot about, because I have grown grapes here in southern Ontario for years and have looked a lot into the wine industry here and am generally an "enthusiast" about the topic.
Part of the reason is just the retail environment, which is a whole cluster of a topic here, but I won't get into that...
Because of... history and culture, Ontario "VQA" wine regulations demand that growers grow almost exclusively various European vinifera varieties (the famous cab sauv, cab franc, pinot noir, etc.) . There's a list of permitted grape varieties, and most new generation hybrids (like e.g. the ones bred by Bruce Reisch's breeding program at Cornell just a couple hours from the Ontario border, or from Minnesota) are not on it, while a whole laundry list of pure vitis vinifera varietals that can barely grow here are.
If you're not growing one of the permitted varieties, you can't even put the word "Ontario" on your wine label. Nor a bunch of other protected words like "Niagara escarpment" or "Lake Ontario" or whatever.
These European varieties are not well adapted to the northeastern/midwestern/great-lakes region here. They are magnets for disease, and wimps in the cold. They are difficult to grow, and about 1/5 winters, they are frozen to the ground to the point where they often need replanting.
So costs to grow are very high. There's spraying and cold protection costs, but also the extra labour involved in managing cold damage, etc. And there's per-tonne price recommendations per grape varieties, and the permitted vitis vinifera varieties naturally cost more to purchase from growers than cheaper hybrids ; but cheaper hybrids of any quality would struggle to get a VQA label, and in any case the LCBO (our monopoly provincial liquor retailer) won't stock them apart from a few mediocre Baco Noirs.
On top of that the regulatory environment prevents producers who have under 5 acres planted from selling wine. But most townships go further and have even stricter regulations on top (10-20 acres, only allowed to grow in X part of the region, etc.)
These regulations are framed as if they're about protecting consumers, but they're really about protecting entrenched winery industry interests here, as well as cultivating a certain "kind" of wine industry which differs markedly from what you will find immediately across the border in the Finger Lakes in New York. And it's also a reaction to the kind of (beyond crappy) wine industry that existed here until the 70s. It's rules written by the baby boomer victors of a battle to make better quality wines here in the 70s and 80s.
The wine industry here is definitely more "snobby" than in NY and other northeastern areas, and it's mostly appealing to a certain conservative baby boomer demographic. The owners are mostly retired lawyers etc. running the wineries. They seem to think/wish they live in Bordeaux or Tuscany and have tacky faux-chateauxs and it's a whole lifestyle thing ... for you to daytrip from Toronto to bask in.
Like much of Canadian "high" culture, it's an inauthentic imitation of European culture, because of our colonial inferiority complex. If we made it, it can't be good, unless it's a complete imitation.
FWIW, there are very excellent vinifera wines made here. In a hot year, earthy delicious Cabernets are entirely possible. And in almost every year, an absolutely fantastic Riesling is possible. My family has roots in the Rhineland, and I've tasted hundreds of Rieslings from both there and here, and Ontario is right up there. And a quality (but $$) Ontario Cab from a good year is more like a Bordeaux than a typical new world Cab; earthy and more low key, not a fruit bomb. More to my tastes.
Anyways, yes, there's protectionism to some degree, but in reality Ontario wine is expensive because it's just really expensive to grow that kind of wine here.
In general you find this kind of thing a lot in Canada. Regulatory capture is all over the place here. Domestic wine is expensive here for the same reasons data plans are. Canadians tolerate monopolistic bullshit way more than they should.