The Gambling Law Review: Macau

Overview

i Definitions

Under the current legal and regulatory framework, there are four types of permitted gaming in the Macau Special Administrative Region of the People's Republic of China (hereinafter, Macau 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 racing – horse and greyhound only), 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, defined as 'those in which the hope of winning resides solely on luck, such as lotteries,2 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'.

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'.

Extension of credit for casino gaming 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'.

ii Gambling policy

Macau 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 Article 1 of Law No. 16/2001 of 24 September 2001 (the Gaming Law), and aims to ensure:

  1. the adequate operation of casino games of chance;
  2. those involved in the supervision, management and operation of casino games of chance are suitable for the performance of these functions and assumption of these responsibilities;
  3. the casino games of chance operate and function in a fair, honest manner and free from criminal influence;
  4. the interests of the MSAR in collecting taxes from casino operations are duly protected; and
  5. tourism, social stability and economic development are promoted in the MSAR.

In January 2022, the government submitted a draft law proposal to the Legislative Assembly to amend the Gaming Law, which was approved at the first reading. Under draft law proposal, the 'new' public policy aims to ensure:

  1. the function and operation of casino games of chance are conducted under the premise of safeguarding national security and the security of the MSAR;
  2. the promotion of adequate diversification and sustainable development of the economy of Macau;
  3. casino games of chance operate and function in a fair and honest manner, and are free from criminal influence;
  4. the function and operation of casino games of chance is in accordance with the policies and mechanisms of the MSAR with regard to combating illegal cross-border capital flows and preventing money laundering;
  5. the dimension and operation of casino games of chance, the practice of games of chance and the entry into casinos are subject to legal restrictions;
  6. those involved in monitoring, managing and operating casino games of chance are suitable for the performance of these functions; and
  7. the interests of the MSAR in collecting taxes from the casino operations are duly protected.

Under Macau 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. A public tender is required only for casino gaming. Exceptions for interactive gaming (for which no concession was ever granted), pari-mutuels and operations offered to the public were granted in exclusivity to a single entity. In the 2021 amendment to the instant lotteries' concession contract (under which sports lottery is offered, i.e., for football and basketball), the exclusivity was removed.

Pursuant to the Gaming Law, the MSAR is precluded from granting more than three casino gaming concessions3 (the draft law proposal raises the maximum number of concessions to six). Notwithstanding this, the Macau government has authorised three casino gaming sub-concessions, permitting each of the casino gaming concessionaires to enter into a sub-concession (the draft law proposal prohibits the sub-concessions).

The MSAR is a permanent gaming zone, thus casinos shall be open 24/7, notwithstanding the right of casino operators to establish daily operation hours that shall be notified three business days in advance to the gaming regulator – 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 government.

The minimum age for entering, playing, and working in casinos is 21 years old. Restrictions to casino entry apply to certain categories of casino operator employees. The minimum age for participating in pari-mutuel and operations offered to the public is 18 years old, Macau's legal age.

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 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 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 Macau 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 Chief Executive after a proposal from the operator. The rules are published in the Macau Official Gazette.

As to sports lotteries, 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 Macau 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 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 Macau Official Gazette.

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

The First Division of the DICJ's Games 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 Second Division of DICJ's Games Inspection Department is charged with the competence to supervise and monitor all non-casino gaming operations. Moreover, the non-casino gaming operators have a government-appointed delegate to follow the operator activities.

Pursuant to Macau law, only casino operators and gaming promoters may, as credit providers, extend 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, in the case of the casino gaming concessions, of legal or contractual obligations impending to the casino operators is null and void except if authorised by the Macau government; the transfer of shares to third parties in a gaming concessionaire is null and void except if authorised by the MSAR.

The MSAR may:

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

Under the draft law proposal, the Chief Executive may also 'annul' the gaming concession based upon:

  1. threat to national security and the security of the MSAR;
  2. agreement with the concessionaire;
  3. redemption;
  4. non-compliance;
  5. public interest; and
  6. lack of concessionaire's suitability.

All casinos (not exempted under the 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 on the date referred to in the concession contract, whichever is the earlier). The reversion is automatic and without entitlement to any compensation to the casino 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 operators, in exchange for a remuneration as prescribed by the concession contract of those assets. As to the horse racing concession, 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 (including electronic table games) can only be operated by casino operators and shall comply with the Macau 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 Macau can only be conducted by licensed manufacturers or distributors authorised by the DICJ.

The greyhound racing concession expired in 2018 and, to date, the 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.

iii State control and private enterprise

Gaming, in all forms, is a highly regulated activity in Macau and the supervision of gaming activities relies primarily on the DICJ.

Pursuant to Macau law, the commercial operation of gaming is reserved to the MSAR and can only be granted to private entities by means of a concession through an administrative contract. Macau utilises a concession system (not a licensing system), and the current situation is of monopoly for horse racing and lotteries (which include sports lotteries), and of oligopoly (restricted to six operators) for casino games of chance.

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.

iv Territorial issues

Macau is the only jurisdiction in the People's Republic of China (PRC) where casino gaming is lawful.

Article 118 of the Macau Basic Law states that the Macau Special Administrative Region is responsible for determining 'at its own initiative and in line with general local interests, the policy for the tourism and entertainment industry'.

Hence, gambling is regulated at the level of the MSAR which, under the Macau Basic Law, exercises a high degree of autonomy, pursuant to an authorisation of the National People's Congress of the PRC, enjoying executive, legislative and independent judicial power, including that of final appeal.4

v Offshore gambling

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

Placing bets over the phone or online is regulated for horse racing, greyhound racing and sports lottery.

There have been some reports on international cooperation over offering online gaming to the Macau market, but it is debatable whether the betting on foreign offshore gambling platforms by Macau residents is an unlawful activity under the laws and regulations in force in Macau, 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

i Legislation 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 (Macau 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 commissions or other types of remuneration due to gaming promoters;
  5. Law No. 5/2004 of 14 June 2004 (extension of credit for casino gaming);
  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, not always published, are mandatory and applicable to all gaming operators in Macau and, despite the fact that they do not carry the same weight as applicable laws, penalties may be enforced if they are infringed. The main guidelines include:
    • Instruction 1/2006 – Minimum Internal Control Rules;
    • Instruction 2/2014 – Macau ETG Technical Standards Version 1.0;
    • Instruction 2/2016 – Macau Jackpot Technical Standards Version 1.0 and Macau CMS Technical Standards Version 1.0;
    • Instruction 1/2017 – Dealer-Operated Electronic Table Game Technical Standards Version 1.0;
    • Instruction 1/2019 – Preventive Measures Against Crimes of Money Laundering and Terrorism Financing;
    • Instruction 5/2019 – Macau Electronic Card Shufflers and Electronic Card Shoes (ECS2) Technical Standards;
    • Instruction 1/2020 – Macau Gaming Certificate Format (MGCF) Version 1.0; and
    • Instruction 1/2021 – Macau EGM Technical Standards Version 2.0; and
  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 Macau 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 2022,5 which detail the rights and obligations of the casino 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 Macau law and in Macau courts; the Macau legal system cannot be bypassed by the laws and courts of other jurisdictions.

Pursuant to the 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 Macau 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); and
  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); and
  7. Order of the Secretary for Economy and Finance No. 75/2009 of 14 July 2009 (odd or even number betting).

Although no greyhound racing concession is currently awarded (the last expired on 20 July 2018) the above-mentioned legislation is still in force.

Operations offered to the public

Chinese lotteries (Chimpupio and Pacapio)
  1. Executive Order No. 8/2004 of 3 March 2004 (official Pacapio lottery regulation); and
  2. Concession contract signed with Sociedade de Lotarias Wing Hing, Limitada, dated 24 August 1990, as amended from time to time, currently extended to 31 December 2022.
Instant lottery (which includes sports 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. Executive Order No. 20/2005 of 27 May 2005 (sports lottery – basketball);
  4. Executive Order No. 67/2018 of 20 April 2018 (sports lottery – football); and
  5. 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 2024.

Interactive gaming

No legal framework has ever been enacted.

Other relevant legislation

  1. Administrative Regulation No. 19/2021 of 21 June 2021 (DICJ Statutes); and
  2. Order of the Chief Executive No. 38/2010 of 10 February 2010 (Macau Gaming Commission).

ii The regulator

The Chief Executive has the highest executive power in relation to gaming matters, which can also be exercised by the Secretary for Economy and Finance, either directly or pursuant to a delegation of powers, and the DICJ.

The oversight of gaming is, prima facie, the responsibility of the DICJ, the regulatory authority of all types of permitted gaming, a department within the government structure and under the Secretariat for Economy and Finance, entrusted with the responsibility of assisting in the definition of the public policy of the gaming sector and its execution, as well as for the regulation, supervision and coordination of the operation and gaming activities.

The DICJ's main powers (as established by Administrative Regulation No. 19/2021 of 21 June 2021), include:

  1. assisting in the definition and coordination of public policy for the gaming sector, implementing its execution;
  2. ensuring that the activities of the gaming concessionaires, its management companies, gaming promoters, and other individuals or entities subject to the gaming laws, as well as the relationship between them and the public, are compliant with the general interests and the Macau law;
  3. assisting in the drafting and improvement of the rules under their powers, as well as to issue instructions to the concessionaires, their management companies, gaming promoters and other individuals or entities subject to the gaming laws;
  4. supervising the activities of the gaming concessionaires, their management companies, gaming promoters and other individuals or entities subject to the gaming laws, namely regarding their compliance with legal and contractual obligations, as well as with the instructions issued by DICJ;
  5. supervising the suitability and financial capacity of the gaming concessionaires, their management companies, gaming promoters and other individuals or entities subject to the gaming laws;
  6. supervising the different gaming activities;
  7. supervising the compliance with the gaming laws;
  8. supervising gaming revenues, namely the gross gaming revenues and other revenues stated in the law and in the concession contracts;
  9. conducting investigation works concerning gaming;
  10. issuing licences for gaming promotion activity;
  11. regulating the supply and inspecting the gaming machines and the respective equipment and systems;
  12. approving the equipment, system and utensils allocated by the concessionaires to the operation of the respective concessions;
  13. promoting the involvement of the concessionaires, their management companies and the gaming promoters in the government's policies and the compliance with corporate social responsibilities;
  14. promoting, coordinating and executing responsible gaming activities; and
  15. pursuing other duties legally entrusted.

Other government entities

The Macau Gaming Commission is a consultative body of, and presided over by, the Chief Executive with the responsibility of formulating policies and facilitating the development of Macau's casino gaming and relevant regulatory framework. It is expected that its role be more active when the amendments to the Gaming Law are enacted.

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 extraordinary 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, created to collect, analyse and disseminate information to the relevant authorities concerning AML & CTF, is responsible for receiving and processing 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.

iii Remote and land-based gambling

To date no laws or regulations on the operation of interactive gaming have been enacted. As several times announced by the 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.

iv Land-based gambling

Casinos are defined under the Gaming Law as places and premises authorised and classified as such by the government. The use of 'casino' is reserved for casino operators, which can only, in accordance with the draft law proposal, operate casino games of chance in properties wholly and directly owned by them.

Also under the draft law proposal, all casinos must identify and clearly demarcate the following areas:

  1. the gaming floor;
  2. the treasury (cage);
  3. surveillance of casinos and ancillary areas;
  4. transport, deposit, storage and custody of gaming chips and cash;
  5. count rooms for gaming chips and cash;
  6. electromechanical, water supply and similar facilities;
  7. sanitary facilities; and
  8. other logistic services areas.

Exceptionally, casino gaming operators may be authorised to explore operations offered to the public.

Although against the principle of games of chance confined to casinos, the gaming machines regulation allows for casino operators to open slot machines centres.6

v Remote 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 Macau residents from registering on online gaming platforms or websites located overseas. To the best of our knowledge, no plans to implement measures to curb residents' access to such platforms or websites exist.

vi Ancillary matters

The Gaming Machines Regulation 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 Macau casinos are subject to a technical assessment by the DICJ under the requirements established by the Regulation. In addition, several instructions with technical standards have been issued on electronic gaming machines (EGMs), card shufflers and shoes, dealer-operated ETG, jackpot and CMS, and ETG.

The latest EGM technical standards (version 2.0) state:

which enter[ed] into effect on September 1, 2021, seek to update the technical requirements for the approval of EGMs by the DICJ. A transition period of 16 months until December 31, 2022 is in place for authorized EGM manufacturers to adapt to and be fully compliant with the new rules and, starting on December 31, 2022 and until 31 December 2024, all casino concessionaires and sub-concessionaires must also submit a biannual report detailing their progress in decommissioning or converting outdated EGMs to fully compliant status with Standards 2.0. Any EGM which is non-compliant with Standards 2.0 by noon of December 21, 2024 must be switched off and withdrawn permanently from the operation. . . . One of the most notable material changes to the previous EGM technical standards is that Standards 2.0 now determine that coin input/output systems are prohibited from using in Macau gaming floors. Likewise, all references to coin-based hardware (i.e., coin validators, coin acceptor requirements and error conditions, diverter, coin hoppers, and error conditions, drop boxes, etc.) are removed from Standards 2.0, as coin acceptors and coin hoppers are no longer foreseen, and gaming software shall also be updated under these changes.7

Manufacturers of gaming machines, equipment and systems must be licensed, and suppliers must obtain authorisation from the DICJ to conduct their business in Macau. Manufacturers and their qualified shareholders (holding 5 per cent or more of the share capital) 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 applicants to a gaming concession, as well as their respective directors and key employees, shall be found suitable under a suitability assessment process. Casino operators must remain suitable during the concession period.

Suitability requirements are also applicable to gaming promoters and their qualified shareholders (holding 5 per cent or more of the share capital), directors and key employees.

However, as to key employees (casino and gaming promoters), no order of the Secretary for Economy and Finance to determine the relevant functions for the purpose of ascertaining who should fall under that category was ever enacted. Nonetheless, the draft law proposal defines as key employees the members of the board of directors, other governing bodies, company secretaries, employees who practice, through a power of attorney, acts on behalf of the companies, and other employees with powers related to management of human resources, finance and business.

vii Financial 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.

There have been discussions on the possibility of the digital (Chinese) yuan being used in the Macau casinos.8

The licensing process

i Application and renewal

Concessions to operate casino games of chance are awarded pursuant to a mandatory public tender, and granted through an administrative concession contract.

Applicants must be limited liability companies by shares incorporated in Macau, with a minimum registered share capital of 200 million patacas (5 billion patacas according to the draft law proposal), having the operation of casino games of chance as sole business scope (although correlated activities may be included pursuant to authorisation from the government) and a Macau permanent resident holding at least 10 per cent (15 per cent according to the draft law proposal) of the applicant's share capital as managing director.

Applicants (as well as their shareholders holding 5 per cent or more of the 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 to demonstrate adequate financial capacity to operate the casino gaming concession (through proper guarantees provided either by financial institutions or the applicant's dominant 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 concession period, being the casino operators subject to permanent and continuous monitoring from the DICJ.

The Gaming Law only allows for up to three casino gaming concessions (six according to the draft law proposal) 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 (no sub-concessions are allowed under the draft law proposal).

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.

To conduct the public tender, a tender commission is appointed by the 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 Macau law, the awards can only be made to applicants 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 amount of the overall premium proposed;
  2. the amount of the special contributions proposed (one for a public foundation for the promotion, development and study of cultural, social, economic, educational, scientific, academic and philanthropic activities, and another for urban development, the promotion of tourism and social security);
  3. experience in running and operating casino games of chance, in activities connected with the operation of games, or in managing casino games or other types of games; and
  4. the existence and nature of investment proposals of relevant interest to the MSAR, especially when made from scratch.

The criteria are likely to be different once the tender regulation is amended.

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 (10 years under the draft law proposal). If a concession is awarded for a period shorter than the maximum allowed by law (currently 20 years), the government may, at any time and up to six months before the end of the concession, authorise one or more prorogations provided that the total period does not exceed the maximum term. Moreover, once the maximum term has been reached, the Chief Executive, may, exceptionally, extend the duration of the concession, one or more times, provided that does not exceed in total five years (three years under the draft law proposal).

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 award following the discussion and negotiation of the terms and conditions under which the operation is to be conducted.

ii Sanctions for non-compliance

The 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 for the breach or non-fulfilment by casino operators or to their management companies of the provisions of the Gaming Law, complementary regulations or casino gaming concession contracts shall be determined by administrative regulation. However, no administrative regulation was ever enacted, despite for many years 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), as amended, and Law No. 5/2011 of 3 May 2011 (ban on smoking), as well as DICJ Instructions that foresee the application of those offenses.

Despite the above, the draft law proposal includes provisions on administrative offences with penalties clearly defined, notwithstanding the concession contracts' penalty clauses. Fines vary between 100,000 and 500,000 patacas for less serious offences (e.g., breach of the duties of accounting and internal controls), between 600,000 and 1.5 million patacas for serious offences (e.g., failure to increase the share capital), and between 2 and 5 million patacas for most serious offences (e.g., operation of other games of chance without authorisation and operation of games in properties not owned by the concessionaire). Additional penalties may be imposed, including the closure of casinos or publication of the administrative sanctions decisions.

Sanctions of a contractual nature

The casino gaming 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 may occur due to breach, in the event of non-compliance with fundamental obligations that are legally or contractually binding on the casino operators.

Contractual sanctions include sequestration, redemption or termination (based on non-compliance or upon public interest).

Sequestration may be actioned by the government whenever an unjustified operational interruption occurs or is imminent, or disturbances or serious organisational deficiencies to the functioning of the concessionaires or in the general assets' condition occur.9

Redemption is a unilateral option right of the MSAR to resume the operation of the gaming reserved to the Region by an act of the government.10 Concessionaires have the right to be compensated.

Government may unilaterally terminate the concession if the concessionaire does not comply with fundamental obligations to which the concessionaire is legally or contractually bound, which may include abandoning or suspending the operation for unjustified reasons; transferring the operation in violation of the law, regulations or concession contract; and failing to pay taxes, premiums and other amounts.

Finally, the government may exercise the right of termination of the concession irrespective of the concessionaire's compliance of its legal and contractual obligations (termination upon public interest grounds).11 In this case, fair compensation must be given to the concessionaire, considering the concessionaire's investments and the remaining time of the concession.12

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 Macau 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

i Casino 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 operation of casino games of chance, an annual premium comprising a fixed and a variable portion is due.

The fixed portion is determined by order of the Chief Executive. The variable portion takes into consideration the following criteria: number of casinos, number of tables (and of gaming machines according to the draft law proposal), games operated and location of the casinos.

Currently, the fixed portion is determined by 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 is set at 30 million patacas. 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 non-VIP gaming table; and 1,000 patacas per gaming machine.

Special gaming tax

Casino 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 operators 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 contracts, the casino 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, under the concession contract, jointly liable with the dredging provider company.

ii Pari-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 31 December 2023, up to a minimum of 1.5 billion patacas.

On 31 December 2018, new obligations and deadlines for completion were imposed on the horse racing concessionaire to comply with a 1.5 billion patacas investment plan. These commitments include the renovation of the equine swimming pool, stables, central building, stands, tote board and tracks (turf and sand). There are other ancillary obligations, which include the construction of hotels and tennis courts, shopping mall, offices and parking, theme park and riding school, as well as other surrounding public areas access. Non-compliance with the deadlines constitutes a violation of the concession and may cause the termination of the concession contract.13

iii Operations 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.

Sports lottery (football and basketball)

The sports lottery 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.

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 Macau Foundation and 1 per cent for the Montepio Oficial de Macau.

iv Gaming 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.

v Gamblers

No taxes are levied on gamblers' winnings.

Advertising and marketing

The Macau 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 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 contracts require casino operators to conduct advertising and marketing campaigns for their properties, namely of their casinos, both in Macau and abroad.

Despite this current contractual obligation, to address responsible gaming, the draft proposal introduces a new provision preventing the casino operators from disclosing, by any means, information and activities related to gaming in the MSAR.

The year in review

2021 continued to be a difficult year for the gaming market in Macau.

At the time of writing, the borders continue (since March 2020) to be closed to foreigners, and strict quarantine measures continue to be in place.

At the end of 2021, the gross gaming revenue (GGR) year-on-year was up 43.7 per cent when compared to 2020, with a total annual GGR of 86.86 billion patacas, still very far from the 292.46 billion patacas recorded in 2019, and from 130 billion patacas forecast by the government.

The number of tourists also increased to 7.7 million from 5.92 million in 2020, yet is far off the all-time record of 40 million in 2019.

i Legal and regulatory framework

The legal and regulatory framework sphere was very active, with the amendments introduced to the statute of DICJ, in June 2021, and, on 15 September 2021, with the launch of the public consultation to amend the Gaming Law.

ii Amendments to the Gaming Law

The government conducted a public consultation of the amendment to the Gaming Law.14 The consultation period lasted 45 days with the government announcing, on 23 December 2021, the results of the consultation based on the following main points:

  1. the number of concessions for operating of casino games;
  2. the term of concessions;
  3. increased legal requirements concerning supervision of concessionaires;
  4. local employment benefits and protection;
  5. strengthening review mechanisms for concessionaires, gaming promoters and their employees;
  6. the introduction of government representatives;
  7. the development of non-gaming elements;
  8. corporate social responsibility; and
  9. explicit stipulation of criminal liability and the administrative penalty regime.

On 21 January 2022, the government submitted a draft law proposal to the Legislative Assembly to amend the Gaming Law. The proposal's scope is, according to the government, to improve the current legal regime and approach new external and internal trends. On 24 January 2022, the draft law proposal was approved in first reading by the Legislative Assembly with 30 votes in favour and one against. It is clear that the majority of the main points stated in the consultation paper will be incorporated as amendments to the Gaming Law.

Public policy

In accordance with the draft law proposal, the public policy aims to ensure:

  1. the function and operation of the casino games of chance are conducted under the premise of safeguarding national security and the security of the MSAR;
  2. the promotion of adequate diversification and sustainable development of the economy of Macau;
  3. the casino games of chance operate and function in a fair, honest manner, and are free from criminal influence;
  4. the function and operation of casino games of chance is in accordance with the policies and mechanisms of the MSAR with regard to combating illegal cross-border capital flows and preventing money laundering;
  5. the dimension and operation of casino games of chance, the practice of games of chance and the entry into casinos are subject to legal restrictions;
  6. those involved in monitoring, managing and operating casino games of chance are suitable for the performance of these functions; and
  7. the interests of the MSAR in collecting taxes from the casino operations are duly protected.

Among other important features, the following should be highlighted and will have an impact on the future of the market:

  1. the number of concessions increased from three to six;15
  2. the maximum term of the concessions decreased from 20 to 10 years;
  3. several legal requirements will increase the supervision of the casino operators;
  4. corporate social responsibility will become an important duty;
  5. the number of tables to be authorised is directly linked to the development of non-gaming elements;
  6. responsible gaming initiatives and plans will be included as a key obligations of the concessionaires; and
  7. criminal and administrative offences will be stipulated.

Suitability assessment

The suitability criteria are proposed to include, among other things whether or not:

  1. the entity subject to the assessment takes excessive risks in regard to the manner it conducts business or the nature of its professional activity;
  2. there is grounded suspicion on the source of funds;
  3. there is existence of unsuitable operations with organized crime; and
  4. persons concerned have been sentenced or indicted for a crime punishable by three or more years' imprisonment.

A new requirement (certainly based on the Nevada Gaming Control Act (e.g., NRS 463.165-166)) states that the concessionaires are obliged to cease any cooperation or association with all individuals or companies that are not considered suitable.

In addition, lack of suitability will be considered a ground for termination of the concession contract.

Financial capacity

The requisite 'financial capacity of the concessionaires' is maintained. However, it is now transposed to the draft proposal the provision included in the public tender regulation by which the government may request the dominant shareholders (or qualified shareholders) to provide a guarantee to the fulfilment of the commitments and obligations of the concessionaires.

Share capital and managing director

The draft law proposal increases the concessionaires' share capital from 200 million to 5 billion patacas and the managing director, who must be a Macau permanent resident, shall hold at least 15 per cent (from the current 10 per cent) of the concessionaires' share capital.

Listing on the stock exchange

The draft law proposal states that the floating share capital in the stock exchange cannot exceed 30 per cent of the concessionaires' share capital.

A duty to inform the government once a qualified shareholder of the concessionaire is listed on the stock exchange has also been proposed.

Corporate social responsibility (CSR)

As mentioned in last year's edition of this chapter, CSR is 'a topic of paramount importance'.16

The draft law proposal states in relation to CSR that the gaming operator shall:

  1. support the development of small and medium-sized enterprises;
  2. support the development of diversification of local industries;
  3. ensure labour rights and interests, namely regarding on-job training and professional advancement of local workers, as well as a welfare system designed to protect workers;
  4. hire disabled or rehabilitated individuals;
  5. support activities of public interest; and
  6. support activities of an educational, scientific and technological nature, environmental protection, cultural and sports, among others.

Annual premium

In relation to the annual premium, the draft law proposal includes assessing the number of gaming machines in addition to the existing criteria, namely the number of casinos, number of tables, games operated and location of the casinos.

Special premium

The draft law proposal also provides for a special premium due in the event a gaming table or machine does not reach the annual minimum gross revenue to be set by order of the Chief Executive. This special premium corresponds to the special gaming tax due on the difference between the gross gaming revenue generated and the minimum gross gaming revenue per table and machine set.

'Annulment', extinction and termination of the concession

The Chief Executive may 'annul' the concession based upon:

  1. threat to national security and the security of the MSAR;
  2. agreement with the concessionaire;
  3. redemption;
  4. non-compliance;
  5. public interest; and
  6. lack of concessionaire's suitability.

Non-compliance with the investment amount and respective criteria stated in the concession contract is also a new ground for termination.

Number of gaming tables and machines

It is stated that there will be a maximum number of gaming tables and machines to be established by the Chief Executive.

Any change in the number shall be authorised by the Secretary for Economy and Finance, who takes into consideration the following factors:

  1. the overall economic situation of the MSAR;
  2. government policies concerning the development of the gaming industry;
  3. the operational condition of the concessionaires;
  4. the overall state of the investment of the concessionaires, including in non-gaming projects; and
  5. the state of use of the gaming tables and machines.

It is also established that the Secretary for Economy and Finance may reduce the number of tables in the event the annual gross gaming revenue generated does not reach during two consecutive years the minimum amount set by the Chief Executive, or the authorised number of gaming tables or machines has not been fully utilised, without just cause, within the period set by the Secretary for Economy and Finance.

Foreign gaming

Under the current concession contracts, casino operators are bound to inform the government if they are engaged in any licensing process or contract to operate casino games of chance in any other jurisdictions, or when operating casino games of chance, even if through a management contract (i.e., 'foreign gaming activity').

This duty of information will give place to the duty of requesting prior authorisation from the government.

The duty of information continues to exist whenever the concessionaire is aware that any qualified shareholder (5 per cent or more (previously it was 10 per cent)) enters into foreign gaming activity.

Gaming chips

A new introduction concerns gaming chips. Concessionaires will be obliged to request authorisation from the DICJ when issuing gaming chips, the number of gaming chips to be put in circulation being subject to the authorisation of the Secretary for Economy and Finance.

In addition, concessionaires are now legally obliged to guarantee the coverage in cash or other form of credit of the chips in circulation.

Responsible gaming

An important feature of the proposal relates to this matter, with the concessionaires obliged to have a comprehensive responsible gaming plan. The plan should include information on responsible gaming and problem gambling behaviours, measures to prevent minors and the legally incapacitated from entering casinos, promotion of exclusion from casinos and the creation of a specialist responsible gaming team to aid, and train, employees.

Our views

Despite the fact that no surprises are expected, it is still possible to fine tune some provisions and wording to enhance clarity and understanding, including:

  1. whether the 30 per cent floating shares that can be listed in the stock exchange are the shares of the concessionaire (as per the wording of the current draft);
  2. the precise boundaries of what constitutes 'threat to national security and to the security of the MSAR';
  3. lifting of the corporate veil and the shareholders and directors' liability for all concessionaire debt, including in particular the outstanding gaming chips, in the event a concession is not secured; and
  4. the need to wind-up the concessionaire when a concession is not secured, as concessionaires operate other businesses and own properties that will pay stamp duty if transferred.

This important landmark now in full speed at the Legislative Assembly is only an additional step towards the sustainable development of the gaming industry.

The outcome of the analysis in the legislative body of the MSAR and the final version of the law will give us an idea of what to expect and how the operators can start preparing for the tender.

One should not disregard that the concrete obligations, in line with the Gaming Law, will be stated in the concession contracts.

iii DICJ revised statutes

Under the revised statutes, the DICJ structure comprises the following departments: Inspection of Games, Investigation, Legal and Licensing, Tax Audit and Compliance, Equipment and IT, Studies and Liaison of Games.

With the amendment enacted, the number of full-time budgeted positions will increase to 459 (from 192).

EGM technical standards (version 2.0)

As mentioned in Section II.vi, EGM technical standards entered into effect on 1 September 2021, and seek to update the technical requirements for the approval of EGMs by the DICJ.

There is a grace period of 16 months for authorised EGM manufacturers to adapt to and be fully compliant with the new rules. Starting on 31 December 2022 and until 31 December 2024, all casino operators must also submit a biannual report detailing their progress in decommissioning or converting outdated EGMs to fully compliant status with Standards 2.0.

Extension of concessions for lotteries

Both the Chinese lotteries' and instant lotteries' (in which sports lotteries are included) concessions were extended until 31 December 2022 and 5 June 2024, respectively.

Case law

The Macau Final Appeal Court confirmed a prior decision of the Second Instance Court that found casino gaming concessionaire Wynn Resorts (Macau), SA jointly liable with the gaming promoter Dore Entertainment Co Ltd for the payment of a VIP patron debt of the former in the amount of HK$6 million.17

This decision was based upon the liability of the casino operators for the activities rendered by the gaming promoters inside the casino. In addition, concessionaires have the duty of overseeing the activities of the gaming promoters.

iv Enforcement

On 28 November 2021, th Macau gaming industry was shaken by the announcement made by the Judiciary Police of the arrest of Alvin Chau, CEO of Suncity Group, the world's biggest junket operator that represented almost half of the Macau VIP gaming market in 2019.

The announcement detailed the crackdown on a crime syndicate with the suspicion of operating illegal gaming activities and money laundering.18 The crime syndicate allegedly set up overseas gambling platforms and invited mainland Chinese residents to engage in illegal online gambling activities.

This followed an arrest warrant announcement made two days before by the People's Procuratorate of Wenzhou City, in Zhejiang Province, PRC, which stated that:

[a]ccording to the criminal facts investigated by the public security department, the People's Procuratorate of Wenzhou city has decided to approve the arrest for Chau Cheok Wa due to his alleged involvement in the crime of establishing [a] casino, which is in accordance to the People's Republic of China's penal code and criminal procedure law. Here, the public security department urge Chau Cheok Wa to surrender as soon as possible, so that leniency can be considered.19

This is seen as an enforcement based on the amendment to China's Criminal Law in effect since March 2021 that considers illegal to 'set up or manage casinos overseas' and to 'organise or solicit' Chinese nationals to travel abroad to gamble.20

Two months later, on 30 January 2022, the Judiciary Police announced the arrest of Levo Chan, Tak Chun Group chair and executive director under similar suspicions.

As a result of this arrest, all but one casino operator terminated all agreements with local gaming promoters, putting an end to an era of Macau's gaming market that started in the 1980s.

Outlook

The analysis made of last year's developments (legal, regulatory, case law and enforcement) already shape and pave the way for what to expect in the years to come as far as Macau gaming market is concerned.

As predicted in last years' chapter, the mass market gamers are on the verge of replacing VIPs once and for all, which has given rise to concerns for all stakeholders involved.

However, in the long term, it might allow the diversification of Macau's economy beyond the gaming industry (which has been a long-awaited goal of the local government and a requirement of the central government).

It was recently announced that the amendments to the Gaming Law will be approved before the term of the current concessions (26 June 2022). The six casino operators have already applied for the extension of their concessions and sub-concessions. A premium of around 50 million patacas will be due for the extension of the concessions and sub-concessions until 31 December 2022. Moreover, and as consideration for the granting of the extension, the government may impose an obligation on the gaming operators to provide a bank guarantee, in an amount depending on the number of employees, to secure their labour liabilities in the event the operators are not able to secure a concession.

This is in line with what has been included in the concession and sub-concession contracts of SJM and MGM, respectively, when the extension until 26 June 2022 was granted and authorised. Under the amendment to the contracts executed in 2019, SJM was obliged to grant in favour of the MSAR a guarantee on first demand in the amount of 3.5 billion patacas, being the amount of MGM of 820 million patacas, to secure the labour liabilities.

With the extension announced, the international public tender will likely start in the third quarter of 2022 with the winning bids to be announced towards the end of 2022. It is doubtful if the time will be enough to prepare, open, conduct and conclude the public tender before 31 December 2022. If not, a new extension of the concession and sub-concessions would have to be granted and authorised, respectively.

Many questions have been raised since the law is being analysed by one of the standing committees of the Legislative Assembly, in particular in the following areas:

  1. satellite-casinos;
  2. the nationality of the managing director;
  3. the threat to national security as grounds for 'annulment' of the concession; and
  4. gaming promoters.

The Macau government announced that a draft law proposal on gaming promotion activity will be submitted to the Legislative Assembly. It is expected the changes are to include the increase of the gaming promoters' minimum share capital amount from 25,000 to 10 million patacas, with obligations of capital deposit from 100,000 to 10 million patacas.

Other amendments may include the obligation of licensing and publication of the names of the senior employees, finance staff and partners of the gaming promoters, as well as having a Macau permanent resident as shareholder with a substantial part of the share capital. It was already announced that like dealers, gaming promoters' collaborators have to be Macau residents. Finally, as already stipulated in the draft law proposal, gaming promoters can only enter into agreements with one single gaming operator operator and cannot share gaming gross revenues.

The Vice Premier of the PRC, Han Zheng, in a meeting with the delegation of Macau legislators to the Chinese People's Political Consultative Conference – the central government's top advisory body – hoped legislators would assist the Macau government in the amendment work of the Gaming Law: 'do a good job in amending the gaming law'.21

Five out the the 18 satellite-casinos declared they will cease operations by 26 June 2022. Other satellite-casinos may also join this initiative.

Finally, MGM China mentioned publicly that it may be required to pay out HK$202.7 million in three legal proceedings brought by patrons claiming that two gaming promoters had failed to refund cash on deposits. The impact those proceedings may have on the real situation of other casino operators is yet to be understood.

The three remaining quarters of 2022 and 2023 will be surely very fruitful on legal and regulatory discussions concerning what is still the most important industry of Macau.

It is now crystal clear that the 'Monte Carlo of the Orient' and 'Las Vegas of the East' must take appropriate steps to diversify its economy and become less dependent upon a single industry.

Gaming will need to have a 'sustainable development' that will cope with, in the words of Secretary for Economy and Finance: 'the launch of the 14th National Five-Year Plan and the General Project for the Construction of the In-Depth Cooperation Zone between Guangdong and Macau in Hengqin, a fundamental period for accelerating the development of adequate diversification of Macau's economy is provided. . . . However, the development of several emerging industries, namely the modern financial industry, “Big health”, cutting-edge technologies, conventions, exhibitions, and commerce, cannot be done overnight, it requires a certain level of bases and even time for its development'.22

Non-gaming elements will be the fundamental bet for the casino gaming concessionaires in the upcoming international public tender.

Footnotes

1 Pedro Cortés is a managing partner at Lektou and António Lobo Vilela is a lawyer at Lobo Vilela Advogado, and was invited to co-author this chapter.

2 Betting on sports (sports lottery – football and basketball only) is permitted under the instant lotteries concession contract awarded to Macau Slot before the enactment of the Gaming Law. It is arguable that sports lottery, as currently regulated, falls within the definition of 'operations offered to the public', as the hope of winning does not reside solely on luck, but under the concession contract, the concessionaire may 'organize and operate other types of lotteries'. At the same time, these sports lottery cannot be considered a pari-mutuel as the odds are fixed.

3 For the purposes of this chapter, (casino gaming) concession or concessionaire include respectively sub-concession or sub-concessionaire. The use of casino operator comprises both the concessionaires and sub-concessionaires.

4 Article 2 of the Macau Basic Law.

5 The government announced in March 2022 that it will extend the current concessions (and authorise the extension of the sub-concessions) until 31 December 2022.

6 See António Lobo Vilela, Macau Gaming Law – Annotated with Comments, Vol. 1, at 175 (2020).

7 See Pedro Cortés and José Filipe Salreta, Dematerialization of Bets in Macau – the new EGM technical standards, in Expert Insights, IAGA, September 2021, (https://www.theiaga.org/dematerialization-of-bets-in-macau---the-new-egm-technical-standards).

8 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).

9 Gaming Law, Article 44. The right to sequestrate a concession is one of the defining characteristics of the concession system: 'By sequestration, the government temporarily replaces the concessionaire “directly or through third parties, thus ensuring the operation of the [concession/sub-concession] and promoting the implementation of the necessary measures to ensure the purpose of the . . . [concession/sub-concession] contract,” by taking over and using the facilities, materials, and equipment, in order to take the necessary measures to ensure the continuity and regularity of the concession or sub-concession activity, as long as the conditions that legitimized it are fulfilled.' – see Vilela, Macau Gaming Law, Vol. 4, at 205–225.

10 Gaming Law, Article 46. Redemption is 'the Government's right, before the expiry of the contract, to resume the performance of the administrative tasks entrusted to the private contractor, not as a punishment to the private contractor but for the public interest, and through fair compensation' – see Diogo Freitas do Amaral, Direito Administrativo: Vol. 3: Lições Aos Alunos do Curso de Direito 465 (1989). 'Redemption translates the MSAR's optional right to resume, “before the expiry of the contractual term,” operation on the concession, through compensation' – see Vilela, Macau Gaming Law, Vol. 4, at 247–267.

11 Gaming Law, Article 48.

12 Termination on public interest grounds is a concession cause of extinction. It translates the resumption of the operation of the conceded activity throughout the concession term on public interest grounds, entitling the concessionaire to receive fair compensation. See Vilela, Macau Gaming Law, Vol. 4, at 309–315.

13 Pedro Cortés, 'Horse racing – the estranged son of betting in Macau', in Expert Insights, IAGA, September 2021. (https://www.theiaga.org/horse-racing---the-estranged-son-of-betting-in-macau).

14 See Pedro Cortés, 'Amendments to the Macau Gaming Law – What Will Change?' Expert Insights, IAGA, January 2022 (https://www.theiaga.org/amendments-to-the-macau-gaming-law---what-will-change-), and António Lobo Vilela, 'Consultation Paper on the revision of the Macau Gaming Law and the questions it entails', Expert Insights, IAGA, September 2021 (https://www.theiaga.org/consultation-paper-on-the-revision-of-the-macau-gaming-law-and-the-questions-it-entails).

15 Despite, de facto, there already being six casino operators. See Section II.1

16 See also, Pedro Cortés, 'Macau Gaming Industry 8.0 – Public Policy Beyond 2022', Gaming Law Review. March 2021. 50–65. (http://doi.org/10.1089/glr2.2020.0029).

17 See on this, 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 (http://doi.org/10.1089/glr2.2020.0030).

18 Newsdesk, 'Suncity Group boss under investigation for running a crime syndicate, illegal gaming activities, and money laundering', Macau News Agency, 28 November 2021 (https://www.macaubusiness.com/breaking-news-suncity-group-boss-under-investigation-for-running-a-crime-syndicate-illegal-gaming-activities-and-money-laundering/).

19 Newsdesk, 'Arrest warrant in mainland China for Alvin Chau', GGRAsia, 26 November 2021 (https://www.ggrasia.com/arrest-warrant-in-mainland-china-for-alvin-chau/).

20 Jane Cai and Go Rui, 'Beijing to expand blacklist of overseas destinations for Chinese tourists', South China Morning Post, 28 January 2021, https://www.scmp.com/news/china/politics/article/3119519/beijing-expand-blacklist-overseas-gambling-destinations-chinese?module=hard_link&pgtype=article.

21 Newsdesk, 'Han Zheng calls for support to gaming law amendment', Macau News Agency, 6 March 2022 (https://www.macaubusiness.com/han-zheng-calls-for-support-to-gaming-law-amendment/).

22 Nelson Moura, 'Economic diversification “inevitable”- Secretary for Economy', Macau News Agency, 26 November 2021 (https://www.macaubusiness.com/economic-diversification-inevitable-secretary-for-economy/).

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