The Gambling Law Review: Macau

Overview

iDefinitions 1

Under the current legal and regulatory framework, there are four types of permitted gaming in the Macao Special Administrative Region of the People's Republic of China (hereinafter, Macao or MSAR):

  1. games of chance, defined as 'those in which the result is contingent because it depends exclusively or mainly on the luck of the player';
  2. pari-mutuel (animal – horse and greyhound only – racing, and sports – football and basketball only – betting), defined as a 'system of betting on animal racing or a sporting event in which the winners split the total amount bet, after deduction of commissions, fees and taxes in proportion to the amount individually bet';
  3. operations offered to the public (lotteries – instant and Chinese), defined as 'those in which the hope of winning resides solely on luck, such as lotteries, raffles, tombola and sweepstakes'; and
  4. interactive gaming, defined as 'games of chance in which (a) a prize in cash or other value is offered or may be won under the respective rules, (b) a player enters or participates in the game by means of telecommunication, namely by means of telephone, telefaxes, internet access, data networks, transmission of video signals or digital data, and to do so, either agrees to make payments in cash or any other value, and (c) the game is also offered or approved as a game of chance or through an electronic or mechanical gaming machine in casinos'.

Gaming promoters (also known as junkets) are defined as 'casino games of chance promoters who operate by providing facilities to players, in particular with regard to transportation, accommodation, food and entertainment, receiving a commission or other remuneration paid by a concessionaire' or a sub-concessionaire.

Gaming machines are defined as 'any device, including gaming programs and associated software, memory compartment, random number generator and storage media for the gaming programs operated wholly or partially by electrical, electronic or mechanical means and designed, adapted or programmed to: (1) the practice of a game, the outcome of which depends solely or mainly on luck; (2) payment, as a result of a bet placed on a gaming machine, of a cash prize, gaming chips, tickets redeemable for cash or goods convertible to gaming chips, cash or cash equivalents'.

Issuance of credit for players is defined as 'the transmission of the ownership of casino gaming chips from a credit provider to a third party without the immediate payment in cash or equivalent of such transmission'.

iiGambling policy

Macao law departs from a principle of prohibition: if a type of gaming is not permitted, then it is prohibited.

Public Policy in relation to gaming is defined in Articles 1 and 2 of Law No. 16/2001 of 24 September 2001 (the Macao Gaming Law), and aims to ensure:

  1. the adequate operation of the games of fortune and chance in casino;
  2. that those involved in the supervision, management and operation of the games of fortune and chance in casinos are suitable persons for such roles and to assume such responsibilities;
  3. the exploitation and operation of games of fortune and chance in casinos are conducted in a fair, honest and free from criminal influence manner;
  4. the interest of the Macao Special Administrative Region in getting taxes resulting from the operation of the games; and
  5. the development of tourism, social stability and economic development of Macao.

Under Macao law, although being an activity reserved for the MSAR, the operation of gaming by an entity other than the MSAR is subject to a prior concession being granted by the MSAR (or a sub-concession being authorised by the Macao government). Currently, a public tender (or a governmental authorisation for sub-concessions) is required only for casino gaming. Exceptions made for interactive gaming (for which no concession was ever granted), pari-mutuels and operations offered to the public are granted in exclusivity to a single entity.

Pursuant to the Macao Gaming Law, the MSAR is precluded from granting more than three casino gaming concessions. Notwithstanding this, the Macao government has authorised three casino gaming sub-concessions, permitting each of the casino gaming concessionaires to enter into a sub-concession.

The MSAR is a permanent gaming zone, thus casinos shall be open 24/7, notwithstanding the right of casino gaming operators to establish daily operation hours that shall be notified three business days in advance to the Gaming Inspection and Coordination Bureau (DICJ). The suspension of the operation of a casino can only occur in very exceptional circumstances and, as a general rule, is subject to prior authorisation from the Macao government.

The minimum age for entering and working in casinos is 21 years old. Restrictions to casino entry apply to some categories of employees of casino gaming operators.

A complete ban on smoking inside casinos has been in force since 1 January 2019.

Casino gaming operators can only operate the games of chance listed in the Macao Gaming Law (baccarat, baccarat chemin de fer, blackjack or 21, boule, craps, cussec (sic bo), 12 numbers, fantan, Chinese dice game, fish-prawn-crab dice game, 13-card game, mahjong, mahjong-baccarat, mahjong-pai kao, pachinko, pai kao, pai kao of two stones, three-card poker, five-card poker, roulette, sap-i-chi or 12-card game, super pan 9, Taiwan-pai kao and three-card baccarat game), or approved by order of the Secretary for Economy and Finance by request of one or more casino gaming operators and after an opinion from the DICJ (casino challenge, dragon/phoenix, football poker, fortune 8, makccarat, Omaha poker, Q poker, stud poker, Texas holdem poker, three-card fortune poker and wheel of fortune).

The rules of games of chance are approved by order of the Secretary for Economy and Finance following a proposal from the DICJ, and published in the Macao Official Gazette.

As to horse racing, the following pari-mutuels in relation to horse-racing results are permitted: pari-mutuel winner, pari-mutuel places, quinella, forecast, double win, double quinella, trio, trifecta, triplo vencedor, quarteto and six up.

Also, regarding horse-racing results, the following lotteries are permitted: cash sweep (ordinary and special), winner sweep and places sweep.

According to the respective concession contract, the rules for pari-mutuels authorised by the concession contract in relation to horse racing are approved by the Macao Chief Executive after a proposal from the operator. The rules are published in the Macao Official Gazette.

As to sports betting, only bets on football and basketball are permitted.

If an operator requests authorisation to operate new lotteries, it shall enclose with the authorisation request a draft of the rules for the DICJ's approval. The rules are published in the Macao Official Gazette.

As to Chinese lotteries, only pacapio and chumpapiu lotteries can be offered.

According to the respective concession contract, the rules of the Chinese lotteries authorised by the concession contract are approved by the Macao Chief Executive after a proposal from the operator. If the operator requests authorisation to operate new lotteries, it should enclose with the authorisation request a draft of the rules for the DICJ's approval. The rules are published in the Macao Official Gazette.

Casino gaming is under continuous and permanent supervision from the DICJ through a team of inspectors on site.

The DICJ's Games of Chance Inspection Department is charged with the competence to supervise and monitor casino frequency and operations, and to ensure the performance of all legal, regulatory and contractual precepts related to games of chance.

As to pari-mutuels and operations offered to the public, the DICJ's Pari-Mutuels Inspection Department is charged with the competence to supervise and monitor pari-mutuels and operations offered to the public and ensure that conduct is in accordance with the technical rules, laws and regulations applicable. Moreover, these types of gaming have a government-appointed delegate to follow the operator activities.

Pursuant to Macao law, only casino gaming operators and gaming promoters may, as credit providers, issue credit to players. Issuance of credit is restricted to casino games of chance.

The transfer to a third party of the operation of the concession (or sub-concession) or, in the case of the casino gaming concessions and sub-concessions, of legal or contractual obligations impending to the casino gaming operators is null and void except if authorised by the Macao government; the transfer of shares to third parties in a gaming concessionaire or sub-concessionaire is null and void except if authorised by the MSAR.

The MSAR may:

  1. sequester a concession or sub-concession when an unjustified suspension occurs or is imminent, or grave deficiencies in the organisation of the concessionaire or in the general condition of the premises or material used for the operation of the concession or sub-concession are verified;
  2. redeem a concession or sub-concession before its term by compensating the concessionaire or sub-concessionaire;
  3. unilaterally terminate the concession or sub-concession due to the failure by the concessionaire or sub-concessionaire to comply with fundamental (legal or contractual) obligations; and
  4. unilaterally terminate the concession or sub-concession due to public interest reasons by paying the concessionaire or sub-concessionaire a fair compensation, which takes into consideration in particular the time of the concession or sub-concession left and the investments made.

All casinos (not exempted under the concession or sub-concession contract terms) and gaming equipment and utensils (including those outside the casino premises) are to revert to the MSAR by the term of the concession or sub-concession (or on the date referred to in the concession or sub-concession contract, whichever is the earlier). The reversion is automatic and without entitlement to any compensation to the casino gaming operator. The enjoyment, fruition and use of the assets reverted may be temporarily transferred to be used in gaming operations by the same or different casino gaming operators, in exchange for a renumeration as prescribed by the concession or sub-concession contract of those assets. As to the concessions for operating horse racing, all premises (except the electrical station, totaliser and all movable assets the horse-racing operator decides to remove within 60 days following the reversion) revert to the MSAR without compensation by the term of the concession.

Gaming machines and electronic table games can only be operated by casino gaming operators and shall comply with the Macao Technical Standards (on electronic gaming machines and electronic table games, for accumulated prizes in gaming machines and for dealer-operated electronic table games, all approved by DICJ instructions), and be certified by an authorised gaming testing laboratory. The supply of gaming machines in Macao can only be conducted by licensed manufacturers or distributors authorised by the DICJ.

Greyhound racing was operated by Macao (Yat Yuen) Canidrome Co Ltd between 1964 and 20 July 2018, the date on which the respective concession expired, due to termination. To date, the Macao government has not granted any new concession for operating greyhound racing, nor has it revoked its legal framework. Nevertheless, it seems to be public policy not to award a concession for this type of gaming anywhere in the future.

iiiState control and private enterprise

Pursuant to Macao law, the commercial operation of gaming is reserved to the MSAR and can only be granted to private entities by means of a concession (or sub-concession) through an administrative contract. Thus, gaming, in all forms, is a highly regulated activity in Macao and the supervision of gaming activities relies primarily on the DICJ.

As to casino gaming, operators are required to be incorporated in the MSAR as limited liability companies and requirements regarding, among others, its share capital, business scope and managing director apply.

Macao utilises a concession system (not a licensing system) and the current situation is of monopoly (pari-mutuel horse-racing, lotteries, which include sports-betting) and oligopoly (games of fortune and chance, restricted to six operators).

ivTerritorial issues

Macao is the only jurisdiction in the People's Republic of China where casino gaming is lawful.

Article 118 of the Macao Basic Law states that 'The Macao Special Administrative Region shall, on its own, make policies on tourism and recreation in the light of its overall interests.'

Hence, gambling is regulated at the level of the MSAR which, under the Macao Basic Law, exercises a high degree of autonomy, pursuant to an authorisation of the National People's Congress, enjoying executive, legislative and independent judicial power, including that of final adjudication.2

vOffshore gambling

Offshore gambling involving sectors such as online casinos and multiplayer online gaming is not permitted in Macao.

Placing bets over the phone or online is regulated for horse racing, greyhound racing and sports lottery (football and basketball betting).

There have been some reports on international cooperation over offering online gaming to the Macao market, but it is debatable whether the betting on foreign offshore gambling platforms by Macao residents is an unlawful activity under the laws and regulations in force in Macao, as there are no grounds for acting against foreign operators when the placement of bets or wagers is made from a cross-border basis.

Legal and regulatory framework

iLegislation and jurisprudence

The main legal and regulatory framework for casino gaming, pari-mutuels and operations offered to the public comprises the following.

Games of chance

  1. Law No. 8/96/M of 22 July 1996 (illegal gambling).
  2. Law No. 16/2001 of 24 July 2001 (Macao Gaming Law).
  3. Administrative Regulation No. 26/2001 of 29 October 2001 (public tender regulation).
  4. Administrative Regulation No. 6/2002 of 1 April 2002 (gaming promotion activity), amended by Administrative Regulation No. 27/2009 of 10 August 2009, which established a new set of requirements for the payment of commission or another type of remuneration due to gaming promoters.
  5. Law No. 5/2004 of 14 June 2004 (extension of credit).
  6. Law No. 10/2012 of 27 August 2012 (entry, work and gaming restrictions in casinos), amended by Law No. 17/2018 of 27 December 2018.
  7. Administrative Regulation No. 26/2012 of 26 November 2012 (gaming machines regulation).
  8. Governmental Guidelines – in particular from the DICJ that occasionally releases instructions on certain specific issues related to casino operations. The DICJ has released guidelines on topics such as anti-money laundering, responsible gaming, gaming promoters' commission cap and accounting requirements, technical specifications of gaming machines and casino internal control rules. These instructions and guidelines are mandatory and applicable to all gaming operators in Macao and, despite the fact that they do not carry the same weight as applicable laws, penalties may be enforced if they are infringed.
  9. Casino gaming concession contracts (signed with Sociedade de Jogos de Macau, SA, Wynn Resorts (Macau), SA and Galaxy Casino, SA), and casino gaming sub-concession contracts (authorised by the Macao government and entered into by and between Galaxy Casino, SA and Venetian Macau, SA, Sociedade de Jogos de Macau, SA and MGM Grand Paradise, SA, and Wynn Resorts (Macau), SA and Melco Resorts (Macau), SA), all currently due to expire on 26 June 2022, which detail the rights and obligations of the casino gaming operators in accordance with the applicable legal and regulatory framework. One of the most relevant clauses established in the contracts is that all legal disputes arising from the contracts shall be exclusively governed and resolved under Macao law and in Macao courts; the Macao legal system cannot be bypassed by the laws and courts of other jurisdictions.

Pursuant to the Macao Gaming Law, the Chief Executive, by means of an Administrative Regulation, determines the rules and specific conditions under which the operation of games of chance is permitted outside casinos (aboard vessels and aircrafts and, restricted to gaming machines, in Macao International Airport). However, no Administrative Regulation has been enacted, nor has the MSAR authorised any operation of games of chance outside casinos.

Pari-mutuels

Horse racing
  1. Executive Order No. 163/90/M of 27 August 1990 (horse racing and pari-mutuels), as amended.
  2. Law No. 9/96/M of 22 July 1996 (criminal offences related to animal racing).
  3. Decree Order No. 12/98/M of 9 February 1998 (triple-winner, double-quinela, double-trio and six-up betting).
  4. Executive Order No. 22/2000 of 3 April 2000 (classified quinela betting).
  5. Executive Order No. 47/2001 of 30 October 2001 (triple-trio betting).
  6. Order of the Secretary for Economy and Finance No. 63/2003 of 15 August 2003 (horse racing betting via the internet).
  7. Concession contract signed with Macau Horse Race Company Limited, dated 4 August 1995, as amended from time to time, currently extended to 31 August 2042.
Greyhound racing
  1. Decree Order No. 7611 of 26 August 1964 (regulation for greyhound racing, the totaliser and Cash Sweep lotteries), as amended from time to time.
  2. Decree Order No. 151/91/M of 12 August 1991 (double-trifecta betting).
  3. Decree Order No. 132/94/M of 24 May 1994 (all-up quinella betting).
  4. Decree Order No. 93/97/M of 5 May 1997 (triple-trio betting).
  5. Executive Order No. 53/2000 of 17 August 2000 (classified quinela betting).
  6. Order of the Secretary for Economy and Finance No. 64/2003 of 15 August 2003 (greyhound racing betting via the internet).
  7. Order of the Secretary for Economy and Finance No. 75/2009 of 14 July 2009 (odd or even number betting).

Although a concession to operate greyhound racing is not currently awarded (the last expired on 20 July 2018), the above-referred legislation continues in force.

Sports betting
  1. Executive Order No. 20/2005 of 27 May 2005 (sports lottery – basketball betting).
  2. Executive Order No. 67/2018 of 20 April 2018 (sports lottery – football betting).
  3. Concession contract signed with SLOT – Sociedade de Lotarias e Apostas Mútuas Limitada, dated 21 February 1989, as amended from time to time, currently extended to 5 June 2021.

Operations offered to the public

Chinese lotteries (Chimpupio and Pacapio)
  1. Executive Order No. 8/2004 of 3 March 2004 (official Pacapio lottery regulation).
  2. Concession contract signed with Wing Hing Lottery Company Limited, dated 24 August 1990, as amended from time to time, currently extended to 31 December 2021.
Instant lottery
  1. Executive Order No. 27/86/M of 1 February 1986 (instant lottery regulation).
  2. Law No. 12/87/M of 17 August 1987 (instant lottery operation).
  3. Concession contract signed with SLOT – Sociedade de Lotarias e Apostas Mútuas Limitada, dated 21 February 1989, as amended from time to time, currently extended to 5 June 2021.

Interactive gaming

No legal framework has ever been enacted.

iiThe regulator

The oversight of gaming is, prima facie, the responsibility of the DICJ, the regulatory and supervisory authority of all types of permitted gaming, a department within the Macao government structure and under the Secretariat for Economy and Finance, entrusted with the responsibility of assisting and supporting the Macao Chief Executive in the definition and execution of the economic policies for the operation of all permitted types of gaming.

The DICJ's main powers (as established by Administrative Regulation No. 34/2003, of 3 November 2003), include:

  1. overseeing, supervising and monitoring the activities of gaming operators and gaming promoters, especially regarding their compliance with legal, statutory and contractual obligations;
  2. overseeing, supervising and monitoring the suitability and financial capacity of gaming operators or any other entity defined under applicable laws;
  3. overseeing, supervising and monitoring the suitability of gaming promoters (individuals or companies), as well as their collaborators and key employees;
  4. collaborating with the government in the process of authorising and classifying locations and premises as casinos;
  5. authorising and certifying all gaming equipment and utensils used by gaming operators;
  6. issuing licences and guidelines for gaming promoters;
  7. investigating and sanctioning in accordance with the applicable legislation any administrative infraction by gaming operators, gaming promoters or any other relevant entity or individual;
  8. ensuring that the relationships between the government and gaming operators, and between gaming operators and the public, are rendered in a regulatory matter most suited to the interests of Macao; and
  9. executing any other guidelines and duties of a similar nature to those outlined above according to the Macao Chief Executive's orders or legal provisions.

The Macao Gaming Commission is a consultative body of, and presided over by, the Macao Chief Executive with the responsibility of formulating policies and facilitating the development of Macao's casino gaming and relevant regulatory framework.

The Financial Services Bureau, under the Secretariat for Economy and Finance, is also vested with regulatory powers concerning, in particular, the accounting of gaming operators and gaming promoters. Concurrently with the DICJ, it may determine an audit to a casino gaming operator or a gaming promoter.

The Judiciary Police, under the Secretariat for Security, has a special unit with exclusive powers to investigate gaming-related crimes committed in casinos or other gaming venues or their surroundings.

The Financial Intelligence Office, under the Secretariat for Security, is responsible for receiving and processing cash transactions and suspicious transactions reports filed by gaming operators and gaming promoters.

The Social Welfare Bureau and the Health Bureau, both under the Secretariat for Social Affairs and Culture, handle problem gambling issues and supervises the casino smoking ban, respectively.

iiiRemote and land-based gambling

To date, and despite recent opinions expressed, no laws or regulations on the operation of interactive gaming have been enacted in MSAR. As several times announced by the Macao government, interactive gaming seems to not be a topic on the table for consideration any time soon, in part due to the sensitive political issues it raises.

ivLand-based gambling

Casinos are defined under the Macao Gaming Law as places and premises authorised and classified as such by the Macao government. The use of 'casino' is reserved for casino gaming concessionaires and sub-concessionaires.

There is also the possibility for casino gaming concessionaires and sub-concessionaires to operate betting and slot machines centres, which may include slot machine halls, lottery ticket sale venues and sports betting venues.3

vRemote gambling

Private entities may be granted a concession for the operation of interactive gaming.

Casino gaming operators cannot operate any interactive games and the interactive gaming concessions are by law autonomous and separated from the casino gaming concessions.

As yet, no regulation on interactive gaming has been enacted, and public policy tends not to encourage this type of gaming.

These restrictions do not prevent Macao residents from registering on online gaming platforms or websites located overseas.

At the time of writing, no plans to implement measures to curb residents' access to such platforms or websites exist.

viAncillary matters

Administrative Regulation No. 26/2012 of 26 November 2012 establishes the legal regime for supply of gaming machines, as well as the requisites for gaming machines and equipment and the gaming systems.

Gaming machines, equipment and systems to be installed in Macao casinos are subject to a technical assessment by the DICJ under the requirements established by Administrative Regulation No. 26/2012 of 26 November 2012. Manufacturers of gaming machines, equipment and systems must be licensed, and suppliers must obtain authorisation from the DICJ to conduct their business in Macao. Manufacturers and their qualified shareholders and directors are subject to a suitability assessment process by the DICJ. Manufacturers licensed in certain major gaming jurisdictions (Nevada, New Jersey, Mississippi, Australia, New Zealand, the United Kingdom and Singapore) may submit a formal request to waive this procedure.

Qualified shareholders (holding 5 per cent or more of the share capital) of the casino gaming operators and gaming promoters, as well as respective directors and key employees shall be found suitable under a suitability assessment process.

However, as to key employees (casino or gaming promoters' key employees), an Order of the Secretary for Economy and Finance on the relevant function to ascertain who should fall under that category for the purpose of assessment of suitability is yet to be enacted.

viiFinancial payment mechanisms

No legislation regarding financial payment mechanisms in the gaming sector has been enacted. Moreover, the use of cryptocurrencies, and bitcoin in particular, have been strongly and expressly discouraged by the local authorities.

Recently there have been discussions on the possibility of the digital (Chinese) yuan being used in the Macao casinos.4

The licensing process

iApplication and renewal

Casino gaming concessions are awarded by means of a mandatory public tender, being granted throughout an administrative concession contract.

Applicants must be limited liability companies incorporated in Macao law, with a minimum registered share capital of 200 million patacas, having the operation of casino gaming as sole business scope and a Macao permanent resident holding at least 10 per cent of the applicant's share capital as managing director. Applicants (as well as their qualified shareholders (holding 5 per cent or more of the applicant's share capital), directors and key casino employees) need to be found suitable to be granted a casino gaming concession (through the assessment of suitability by the DICJ), and have to demonstrate adequate financial capacity to operate the casino gaming concession (through proper guarantees provided either by financial institutions or the applicant's main shareholders). The suitability assessment is based on specific forms that closely follow the Multi-Jurisdictional Personal History Disclosure Form of the International Association of Gaming Regulators. Suitability and financial capacity must be maintained throughout the casino gaming concession period, being the casino gaming operators subject to a permanent and continuous monitoring from the DICJ.

The Macao Gaming Law only allows for up to three casino gaming concessions to be awarded. Notwithstanding, there are currently three casino gaming concessions (awarded in 2001) and three casino gaming sub-concessions (one for each casino gaming concession) authorised. Unless the Macao Gaming Law is amended, it is not currently possible to call for a tender to award additional casino gaming concessions.

The public tender may be simple or restricted with prior qualification and include one or more consecutive consultation stages with the applicant, which are essentially intended for the submission of award proposals and their consideration. As the tender is restricted with prior qualification, it is a multistage process inasmuch as the consultation phase is preceded by a pre-qualification phase intended exclusively for the selection of candidates for the consultation phase for the award of the concession, according to general criteria of experience, reputation, technical qualification, financial or economic situation or other criteria to be defined in the tender programme and not provided for in the award submission.

To conduct the public tender, a tender commission is appointed by the Macao Chief Executive.

The tender programme shall specify, inter alia, the minimum requirements for admission of applicants and of the award proposals. It shall also contain the criteria for awarding the casino gaming concessions. Pursuant to Macao law, the awards can only be made to bidders that, in addition to being deemed suitable and with financial capacity, present the most advantageous conditions for the MSAR in the proper operation of casino games of chance. For the effects of determining the most advantageous conditions, the legislator laid down the following main criteria:

  1. the value of the overall premium proposed;
  2. the value of the special contributions proposed (intended for a public foundation for the promotion, development and study of cultural, social, economic, educational, scientific, academic and philanthropic activities, and intended for urban development, the promotion of tourism and social security);
  3. experience in running and operating games of chance in casinos, in activities connected with the operation of games of chance, or in running casinos or other types of games of chance; and
  4. the existence and nature of investment proposals of relevant interest to the MSAR, especially when effected from scratch.

In order to be admitted to the tender, bidders shall provide a guarantee deposit for admission to tender, in the amount determined by Order of the Chief Executive (set at 1 million patacas in the public tender opened in 2001).

Concessions are granted by means of an Order of the Chief Executive based on a substantiated report by the tender commission through an administrative concession contract, and for a period not exceeding 20 years. If a concession is awarded for a period shorter than the maximum allowed by law (20 years), the Macao government may, at any time and up to six months before the end of the concession, authorise one or more extensions provided that the total period does not exceed the maximum term of 20 years. Moreover, once the maximum term has been reached, the Macao Chief Executive, may, exceptionally, extend the duration of the concession, one or more times, provided that does not exceed in total five years.

As for pari-mutuels and operations offered to the public, in the absence of regulations on the granting of concessions for operating these types of gaming, the incumbent concessionaire is chosen by direct negotiations with the Macao government over the discussion and negotiation of the terms and conditions under which the operation is to be conducted and any extension of its term.

iiSanctions for non-compliance

The Macao government authorities that enforce prohibitions on gaming activities are the DICJ, as the primary regulator of all types of gaming, and the Judiciary Police, a criminal police body vested with exclusive powers to investigate crimes related to gaming committed in casinos or other gaming venues or their surroundings.

Sanctions of a criminal nature

The Basic Law and the Criminal Code establish the 'principle of legality' by which a criminal offence must be previously declared in the law. Gaming-related crimes are not an exception, and the laws and regulations setting out criminal offences strictly related to or arising from gaming activities comprise:

  1. Law No. 8/96/M of 22 July 1996 (illegal gambling), which sets the sanctions applicable to a significant number of unlawful gaming-related activities;
  2. Law No. 9/96/M of 22 July 1996 (criminal offences related to animal racing), which sets the sanctions applicable to unlawful animal race-related activities;
  3. Law No. 6/97/M of 30 July 1996 (organised crime), which defines what shall be considered as criminal association and sets the sanctions applicable to activities carried out by individuals who are part of criminal organisations;
  4. Law No. 2/2006 of 3 April 2006 (AML), which sets the sanctions applicable to money-laundering activities;
  5. Law No. 3/2006 of 3 April 2006 (terrorism financing), which sets the legal framework and the sanctions applicable to individuals involved in financing of terrorism financial operations;
  6. Administrative Regulation No. 7/2006 of 15 May 2006, which sets the preventive measures for the crimes of money laundering and terrorism financing;
  7. Law No. 6/2016 of 29 August 2016 (enforcement of freezing of assets), which sets the legal framework to enforce UN Security Council sanctions involving the freezing of assets and funds of identified terrorists; and
  8. DICJ Instruction No. 1/2016 of 21 April 2016 (anti-money laundering and terrorism financing for the gaming sector guidelines), as amended by DICJ Instruction No. 1/2019 of 29 January 2019, which sets the procedures to be applied under casino-related financial operations and the procedures to be followed by casino cages and gaming promoters.

Sanctions of an administrative nature

The framework of infractions for the breach or non-fulfilment, attributable to casino gaming concessionaires or to its management companies, of the provisions of the Gaming Law, complementary regulations or casino gaming concession contracts shall be determined by Administrative Regulation.

Notwithstanding the above, an Administrative Regulation on administrative offences has not yet been enacted, despite for many years now the government announcing such an enactment, in particular in the annual government policy address.

The scarce administrative offences provisions provided in the law can be found in Law No. 8/96/M of 22 July 1996 (illegal gambling), Law No. 10/2012 of 27 August 2012 (entry, work and gaming restrictions in casinos), as amended, and Administrative Regulation No. 6/2002 of 1 April 2002 (gaming promotion activity), as amended.

Other legislation related to the operation of casino gaming providing for administrative offences applicable to the gaming sector include Law No. 7/89/M of 4 September 1989 (advertising activity), Decree Law No. 47/98/M of 26 October 1998 (administrative licensing of certain economic activities), Law No. 2/2006 of 3 April 2006 (AML) and Law No. 5/2011 of 3 May 2011 (ban on smoking).

Sanctions of a contractual nature

The casino gaming concession and sub-concession contracts stipulate sanctions, with the nature of penalty clauses, in the case of assignment, transfer, disposal or encumbrance of the operation of a casino or gaming area.

Moreover, termination of concessions (and sub-concessions) may occur due to breach, in the event of non-compliance with fundamental obligations that are legally or contractually binding on the casino gaming concessionaires (and sub-concessionaires).

Wrongdoing

Over the years, continuous efforts have been made to combat money laundering, especially after the enactment of the most recent anti-money-laundering framework in 2006.

Since 2015, the DICJ has been setting higher standards for anti-money-laundering compliance by introducing new accounting requirements to be observed by gaming promoters and updating guidelines (Instruction No. 1/2016 was amended by Instruction No. 1/2019) applicable to gaming operators and gaming promoters, as well as a risk-based approach that enhances customer due diligence procedures, requiring, among other things, a stricter identification of patrons and reporting of suspicious cash transactions (equal to or greater than 500,000 patacas).

The Asia-Pacific Group on Money Laundering has acknowledged the efforts and progress made by the Macao government. In the 2017 Mutual Evaluation Report, the MSAR obtained 37 compliant out of the 40 Financial Action Task Force (FATF) recommendations on technical compliance assessment (the remaining three recommendations only required further improvements), and in the 2019 Mutual Evaluation Report, the MSAR successfully upgraded the remaining three FATF recommendations to largely compliant ratings, becoming the first member to pass all 40 FATF recommendations on technical compliance assessment among all globally evaluated members.

Taxation

iCasino gaming

Casino gaming operators have to pay an annual premium, a special gaming tax and two special contributions.

Annual premium

As a consideration for the exploitation of casino games of chance, an annual premium comprising a fixed and a variable portion is due.

The fixed portion is 30 million patacas as per the Order of the Chief Executive No. 215/2001 of 30 October 2001 (and the sub-concession contracts in relation to the sub-concessionaires), and the variable portion is based on the number and type of gaming tables and gaming machines operated: 300,000 patacas per VIP gaming table; 150,000 patacas per mass market gaming table; and 1,000 patacas per gaming machine.

Special gaming tax

Games of chance are subject to a special gaming tax of 35 per cent levied on the gross gaming revenue, applicable to all games, including gaming machines. No offset of uncollectable gaming debts is allowed.

Special contributions

Casino gaming concessionaires are required to propose, during the public tender, the percentage they would be bound to pay during the term of the concession for two different contributions, one of an annual amount not exceeding 2 per cent of gross gaming revenue to a public foundation for the promotion, development and study of cultural, social and economic, educational, scientific, academic and philanthropic activities, and another in an annual amount not exceeding 3 per cent of gross gaming revenue for urban development, tourism promotion and social security of the MSAR.

As per the casino gaming concession and sub-concession contracts, the casino gaming operators are bound to pay 1.6 per cent of gross gaming revenue as a contribution to a public foundation and 2.4 per cent of gross gaming revenue as a contribution for urban development, tourism promotion and social security of the MSAR, with an exception made for SJM, which is only bound to 1.4 per cent due to the dredging obligation that it is jointly liable with the dredging provider company.

iiPari-mutuels

Horse racing

The horse-racing operator is subject to pay an annual rent of 15 million patacas and a tax on the total annual amount of the bets registered in the totaliser, as follows:

  1. on the difference between 2.5 billion and 3 billion patacas, 0.5 per cent;
  2. on the difference between 3 billion and 3.5 billion patacas, 1 per cent;
  3. on the difference between 3.5 billion and 4 billion patacas, 1.5 per cent;
  4. on the difference between 4 billion and 4.5 billion patacas, 2 per cent; and
  5. above 4.5 billion patacas, 2.5 per cent.

Moreover, in consideration for the (last) renewal of the concession (until 31 August 2042), the concessionaire agreed to be bound to gradually increase its share capital until 2023, up to a minimum of 1.5 billion patacas.

Sports betting (football and basketball)

The sports betting operator is subject to pay an annual rent, with a minimum of 6 million patacas, calculated in accordance with the following:

Gross revenue (patacas)Rate (per cent)Rent due (patacas)Rent due, accumulated (patacas)Average rate (per cent)
0 to 30 million206 million6 million20
30,000,001 to 40 million222.2 million8.2 million20.5
40,000,001 to 50 million242.4 million10.6 million21.2
50,000,001 to 60 million262.6 million13.2 million22
60,000,001 to 70 million282.8 million16 million22.86
70,000,001 to 100 million309 million25 million25
100,000,001 and above25

Gross revenue is defined as the difference between the total amount of sales and the amount that, under the concession contract, shall not be retained by the operator.

iiiOperations offered to the public

Instant lottery

The instant lotteries operator is subject to pay an annual rent of a minimum 1 million patacas, calculated in accordance with the following:

  1. sales of 0 to 10 million patacas, rent of 1 million is due;
  2. sales of 10,000,001 to 30 million patacas, rent of 12 per cent of the excess is due;
  3. sales of 30,000,001 to 45 million patacas, rent of 13 per cent of the excess is due;
  4. sales of 45,000,001 to 60 million patacas, rent of 14 per cent of the excess is due;
  5. sales of 60,000,001 to 80 million patacas, rent of 16 per cent of the excess is due;
  6. sales of 80,000,001 to 100 million patacas, rent of 18 per cent of the excess is due; and
  7. sales of 100,000,001 patacas and above, rent of 20 per cent of the excess is due.

Chinese lotteries

The Chinese lotteries operator is subject to pay an annual premium of 500,000 patacas, an annual rent of 23 per cent of the gross gaming revenue (defined as the difference between the ticket sales and the premiums paid), and an additional 5 per cent for the Macao Foundation and 1 per cent for the Montepio Oficial de Macau.

ivGaming promoters

Gaming promoters are also subject to pay a special tax based on the gross revenue originated by the player. The tax rate on commissions or other remuneration paid to gaming promoters is 5 per cent and is discharging in nature.

vGamblers

No taxes are levied on gamblers' winnings.

Advertising and marketing

The Macao authorities have a very conservative approach in relation to advertising of games of chance. Under Law No. 7/89/M of 4 September 1989 (advertising activity), restrictions apply to games of chance: games of chance, as the primary focus of the advertising message, may not be advertised, although the activity associated with them can be subject to dissemination in classified ad listings, commercial yearbooks and other similar publications. In practice, the authorities strongly discourage all gaming operators and gaming promoters from launching advertising and promotional campaigns outside the development where the casino is located.

The restrictions were complemented with the 'Instructions on the recognition of illegal advertising on games of chance', issued by the Economic Services Bureau in June 2015, which is limited to games of chance and details the kind of advertising activities considered illegal. The illegal advertising of games of chance constitutes an administrative offence punishable with a fine of 2,000 to 12,000 patacas for natural persons and of 5,000 to 28,000 patacas for legal persons.

In July 2019, the DICJ required casino gaming operators and gaming promoters to request approval to advertise or promote inside the casinos 'any commercial activities that are not related to gaming business . . . including through verbal communication, different means of media or equipment, such as display counter, electronic equipment or hard copies of promotional materials'.

Nevertheless, the casino gaming concession and sub-concession contracts require casino gaming operators to conduct advertising and marketing campaigns both in Macao and abroad.

The year in review

On 4 February 2020, the Macao government ordered the suspension of operations of the 41 casinos of the MSAR for a period of 15 days. The measure, which happened for the first time in Macao's casino history, was taken to contain the spread of the covid-19 pandemic, after the detection of some cases.

In the beginning of March 2020, the borders were fully closed to foreigners, with this measure eased at the time of writing.

At the end of 2020, the gross gaming revenue (GGR) year-on-year was down 79.3 per cent, with a total annual GGR of 65.44 billion patacas. In 2019, the GGR reached 292.46 billion patacas.

The number of tourists decreased from almost 40 million in 2019 to nearly 5.92 million in 2020, which represents an 85 per cent year-on-year decline.

Gaming operators have not, as result of covid-19, had massive layoffs of Macao residents.5 We can approach this position of corporate social responsibility from at least two different angles. One is that the industry's protection of jobs is a way of truly acknowledging what Macao has given to the operators and, hence, it is true example of corporate responsibility behaviour. Another is that it is a way to position the companies for the 2022 tender, and of praising the government. In some cases, we know that it was the first, but in almost all cases it seems a mix of both.

During 2020, the Macao government worked closely with the casino gaming operators to minimise the impact covid-19 pandemic had in the gaming industry and, consequently, in the local economy, heavily dependent on tourism – and almost inexistent during the entire year.

No changes in the legal and regulatory framework occurred during the course of 2020 in relation to the gaming industry.

As to court cases, a dispute concerning funds on deposit by patrons with VIP gaming rooms (run by gaming promoters), brought before the Macao courts against a gaming promoter and the casino gaming operator where the VIP gaming room was located, is still pending. The outcome of the case is important to the gaming industry, especially to gaming promotion activity.6

The year was also marked by the death, in May 2020, of Dr Stanley Ho Hung-Sun, Macao's king of gambling, at the age of 98, and, in January 2021, of Mr Sheldon Gary Adelson.

Outlook

The covid-19 pandemic completely changed the fruitful Macao gaming market. The losses associated with the big decline in the number of visitors and consequently on GGR may change the path of the industry.

The Secretary for Economy and Finance Policy Address for 2021, mentioned the following goals:

  1. stabilisation of the economy;
  2. security of employment;
  3. maintenance of the living conditions of the population;
  4. increasing domestic demand, and;
  5. integrating in the broader framework of the national economy.

The principal actions proposed have the purpose of: safeguarding and stimulating the economy; reinforcing the diversification of the economy; intensifying the boosting effect of tourism; promoting use of cashless payment; and advancing work relating to the cooperation between Guangdong and Macao on Hengqin island. It was stated that the Macao government intends to ensure Macao ID holders secure a minimum of 85 per cent of all leadership and managerial positions with the city's gaming operators.

It is understood by the Macao government that the structural weakness of the economy, excessively dependent as it is on tourism and gaming, became more well known as a result of the pandemic. It is now considered that the diversification of the economy is the only way forward.7

The Secretary for Economy and Finance recently announced plans for launching a public consultation on the amendment to Macao Gaming Law during the second half of 2021, deeming it 'very important as it relates to the well-being of the local population'. The opening of an international public tender continues scheduled for 2022 as the current concessions and sub-concessions are due to expire on 26 June 2022.

Earlier, during the Policy Address of late November 2020, the Secretary mentioned that the proposed changes to the Macao Gaming Law could be submitted to the Legislative Assembly by the last quarter of 2021, which would push the launch of the tender launching in the first or second quarter of 2022 ahead of 26 June 2022.

If the plan currently in place is not fulfilled, which – given several circumstances, seems likely to be the case, in line with previous comments on the subject,8 the Macao Chief Executive may extend all casino gaming concessions (and authorising the extension of all casino gaming sub-concessions) one or more times, up to five years (until 26 June 2027).

As mentioned in last year's edition of this chapter, the revision of the regulations on gaming promoters (namely on suitability and financial capacity requirements) and gaming machines (namely on the improvement of the licensing of gaming machines manufacturers), announced by the Macao government in the past and included in the Policy Address for 2021, might be finally considered. Administrative Regulation No. 26/2001 of 29 October 2001 (public tender regulation), which governs the casino gaming concession awarding criteria, is not within the list of laws and regulations to be amended.

Additionally, it is also expected that legislation long due on administrative offences in the gaming sector and on gaming chips be enacted. In fact, the Macao Gaming Law stipulates that the government shall enact complementary legislation covering, in particular, the public tender process, concession contracts, the use and frequency of casinos, the operation of the premises used for the exploitation of casino gaming concessions, the monitoring of gross gaming revenues, the casino gaming operators' employees, the practice of casino games of chance and administrative infractions. As yet, only legislation on the public tender process and concession contracts (Administrative Regulation No. 26/2001), the frequency of casinos (Law No. 10/2012, as amended) and administrative infractions restricted to the piece of legislation where they are included (Administrative Regulation No. 6/2002 and Law No. 10/2012, as amended) has been enacted.

It is expected that social responsibility will be a topic of paramount importance in the public tender announced for 2022. Notwithstanding the Macao laws not applicable at the moment, casino gaming operators have been putting in place mild measures in this regard, especially because Macao legislators from time to time voice such a need and the Macao government has been advising its implementation, particularly in relation to casino employees; the Chinese lotteries operator has a contractual obligation to deposit (in a bank account opened in its name specifically to the effect) the amount of all unclaimed premiums and donate them to charitable institutions chosen by the operator directly and accepted by the MSAR; the instant lotteries and sports betting operator has a contractual obligation to deposit 1 million patacas every year to a denominated health fund, created with an initial capital of 2.5 million patacas pursuant to a contractual obligation; SJM and MGM agreed, as consideration for the extension of the contractual term of their casino gaming contracts, to be included in the mandatory social security regime and to provide the Macao government with a bank guarantee to secure the payment of labour debts. Almost two years have passed, and the Macao government has not imposed a similar obligation on the remaining casino gaming operators.

Moreover, it is yet to be considered whether public policy will remain the same and whether the Macao government should contemplate not only the amount of premium or contributions to be paid, but also the following in terms of criteria to award the concession:

  1. proposals for investment in the Greater Bay Area, vis-à-vis the creation of an international world-class tourism destination, recognising the uniqueness of cultural and social resources of Macao;
  2. proposals for investments to create new tourism-source markets;
  3. contribution to the long-term welfare of the Macao residents;
  4. enhancement of innovation in gaming, and creation of an innovative-technology centre;
  5. contribution to public education policies and to attracting international talent; and
  6. corporate and social responsibility plans.9

Finally, the possibility of introducing a digital yuan as a funding option to the region was recently in the headlines.

Despite the Macao regulator stating that potential use of a digital yuan in Macao's casinos was 'fake news', on 13 April 2020, Macao's Chief Executive, at the Legislative Assembly, talked about plans to 'study the feasibility of issuing a digital currency' aiming 'to improve effectiveness in reducing money laundering, tax evasion and terrorism financing'.10

This new form of currency could have impact and jeopardise the gaming promotion activity that has underpinned the entire industry since the 1980s.11 A centralised, trackable and seizable digital currency would provide never-before-seen visibility over clash flows to the city cages. This could single-handedly cut off the shadow banking and money laundering activities that have plagued economies worldwide.12

This introduction may disrupt the traditional gaming industry in Macao, with mass market gamers replacing VIPs once and for all. If this transition is too swift, it will give rise to concerns for all parties involved. However, in the long term, it might allow Macao's market to be included in a single currency jurisdiction with mainland China (or, at least, with the Greater Bay Area), diversifying Macao's economy beyond the gaming industry (which has been a long-time dream of the region and, particularly, the central government).13

Footnotes

1 Pedro Cortés is managing partner of Rato, Ling, Lei & Cortés – Advogados e Notários (Lektou) and António Lobo Vilela is currently an independent advisor on gaming and gaming-related matters and was invited to co-author this chapter.

2 Article 2 of the Macao Basic Law.

3 See António Lobo Vilela, Macau Gaming Law – Annotated with Comments, Volume I, 2020, p. 175.

4 See Pedro Cortés and Luís Machado, 'Role of digital yuan in gaming industry', International Law Office Newsletters, 2 February 2021 https://www.internationallawoffice.com/Newsletters/Private-Client-Offshore-Services/Macau/Rato-Ling-Lei-Corts-Advogados/Role-of-digital-yuan-in-gaming-industry).

5 Which can be seen as evidence of corporate social responsibility in action. See Pedro Cortés, 'What to expect in the Macau gaming industry during 2020?', International Association of Gaming Advisors (IAGA) Expert Insights (May 2020) https://www.theiaga.org/what-to-expect-in-the-macau-gaming-industry-during-2020-).

6 See António Lobo Vilela, 'The Liability of Macau Casino Operators for the Activity Rendered Inside Casinos by Gaming Promoters (Junkets) – An Update on the Current Litigation', Gaming Law Review. Mar 2021. 66-75. Available at http://doi.org/10.1089/glr2.2020.0030.

7 See Pedro Cortés, 'Macau Gaming Industry 8.0 – Public Policy Beyond 2022', Gaming Law Review. Mar 2021.50-65. Available at http://doi.org/10.1089/glr2.2020.0029.

8 See 'Veteran Macau Observers Back Concession Extensions, Seventh Concession', Vixio, 23 May 2019 (https://vixio.com/insight/gamblingcompliance/veteran-macau-observers-back-concession-extensions-
seventh-concession/).

9 Pedro Cortés, 'Macau Gaming Industry 8.0 – Public Policy Beyond 2022'.

10 See 'Macau Moves Step Closer to Digital Currency in Threat to Casinos', Bloomberg News, 14 April 2021. Available at: https://www.bloomberg.com/news/articles/2021-04-14/macau-moves-step-closer-to-digital-
currency-in-threat-to-casinos.

11 As expressed by Pedro Cortés and Luís Machado, 'Role of digital yuan in gaming industry', International Law Office Newsletters, 2 February 2021. Available at https://www.internationallawoffice.com/Newsletters/Banking-Financial-Services/Macau/Rato-Ling-Lei-Corts-Advogados/Role-of-digital-yuan-in-gaming-industry.

12 Pedro Cortés and Luís Machado. 'Role of digital yuan in gaming industry'.

13 Pedro Cortés and Luís Machado. 'Role of digital yuan in gaming industry'.

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