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New gambling laws in Macau

Darren March 5, 2022

The Macau casino industry is eagerly waiting to see the outcome of legislation created to promote responsible gaming and community engagement. The government are looking to extend their abilities to overlook the operation of casinos and prevent any fraudulent activity.

The release of new gambling laws in Macau is a significant event for all those in the industry. While the legislation is still awaiting approval, it provides a clear picture of what casino owners should expect. Among the many changes envisaged is a greater focus on responsible gaming and community engagement.

The Macau government released the draft bill during a press conference where they outlined their pressing concerns concerning gambling laws. Following the imminent retendering for casino licences, the government confirmed the provision of six concessions. Each concession would be for 10 years. Each option would have a possibility of a three-year extension in some cases. MGM China, Wynn Macau, Sands China, SJM Holdings, Galaxy Entertainment and Melco Resorts all have licenses set to expire in June.

Under current regulations Macau draft gambling laws bill concessionaires can operate a maximum number of gaming tables and machines each year.

The Chief Executive of Macau will keep an eye on the sector to set a minimum annual gross income for each gaming table or machine. If the minimum annual income is not met for at least two consecutive years, the city’s leader has the authority to decrease the number of machines used.

Corporate Social Responsibility (CSR) will be more of a focus in the future as opposed to how much money the casino floor generates. In the future, Macau’s casino operators will need to place a greater emphasis on gambling laws that focus on corporate social responsibility (CSR) efforts. The city will require operators to boost small and medium-sized enterprises. There will be a focus on local industry diversification, better labor rights, and the hiring of disabled persons.

They must also be willing to invest in programs related to education, science and technology, the environment, culture and sports.

The Macau Gaming Inspection and Coordination Bureau will audit concessionaires every three years to observe commitment to the contract.

The Secretary of Economy and Finance will refer any concessionaire who does not follow the conditions of their contracts or is not diligent in adhering to them. The number of shares publicly listed are capped at 30% for each licence holder. Authorities must be made aware of any other financial transactions.

The government has stated that it has the authority to cancel the casino’s contract for a variety of reasons, including public interest or breach of contract.

Part of the compliance check will be based on an annual report that operators will need to submit. This includes CSR initiatives as well as the operator’s responsible gaming solutions.

The updated gambling laws in Macau must include additional information about the future of Macau’s junkets. The gaming legislation reforms will also restrict revenue-sharing agreements between gambling concessionaires and junkets.

The Secretary of the Treasury and Finance will keep issuing junket licences to certified VIP promoters. However, they will limit promoting games to just one concessionaire per licensee. This is in sharp contrast to previous years. Large junkets companies used to dedicate VIP suites or numerous rooms in the concessionaires.

The bill includes a prohibition of gaming junkets or similar third-party businesses unless in circumstances judged necessary. This is dependent on their partners, employees, or management group.

Macau avoided raising its gaming tax, introducing a licence charge, or stationing a government observer inside big casinos, however. This came as a comfort to the territory’s operators. This should have eliminated most investors’ fundamental concerns about the updated gaming law.

The legislation will also require executive directors who are permanent Macau permanent residents to own at least 15% of the license holder’s share capital.

This is up from 10% previously. It is unlikely to have a direct impact on operator stocks listed in Hong Kong however.

In a report released after the news, JPMorgan analysts expressed surprise at the government’s actions. They believe the measures will help to normalise multiples. They also believe that they will make the industry more accessible to a broader range of investors.

The law has had a huge impact on casino owners’ stock prices. It has accentuated the severe drop already experienced as a result of the Covid-19 outbreak. Even after the rebound, a Bloomberg index tracking the six largest Macau casino firms listed in Hong Kong was down nearly 50%.

While this new draft regulation provides some clarity in the short term, it does not necessarily mean a return to the industry’s heyday.

Macau’s secretary for administration and justice, Cheong Weng Chon, said he had considered the city’s economy when setting the maximum of six licences. They also took into account a proper scale of expansion for the gaming industry.

Macau’s legislative body hasn’t approved the legislation yet. This will happen within two months, which means that existing casino concessions may not be extended.

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