The Legislative Assembly of Macau’s approval of gaming credit legislation, which prohibits junkets from extending gaming credit, is viewed as a significant step towards aligning with public policy in China and Macau.
In an interview with AGB, industry veteran Fredric Gushin endorsed the legislation, stating, “There are unique issues in China because gambling debts are not legal, making the credit decision more important. The junkets operated in an old-fashioned, underground manner, which was inconsistent with public policy in China, Macau, and indeed the world.”
Gushin believes that casinos should be responsible for everything that occurs within their premises, hence “the concept of junkets performing critical casino-related functions is inconsistent with that.”
He also noted the cessation of junkets owning the cage (physical cashier counters on casino floors), likening it to the gaming credit legislation.
The recent legislation, formally titled the “Legal Regime for Granting Credit for Games of Chance in Casinos,” was unanimously approved by the Legislative Assembly of Macau last Friday and is set to take effect on August 1st of this year.
This legislation mandates that only gaming operators can extend chips to gamblers as credit, while junkets are prohibited from engaging in credit activities. However, gaming operators have the option to enter into agency appointment contracts or agency outsourcing contracts with junkets, allowing them to assist in finding gamblers seeking credit and earning commissions in the process.
Additionally, any changes to agency contracts between gaming operators and junkets, along with their supplementary documents, must receive approval from the Secretary for Economy and Finance of Macau.
Transformational change
Fredric Gushin, managing director of Spectrum Gaming Group with over 30 years of experience in the gaming industry, believes that the legislation is an important step, stating, “It would be consistent with everything else they’ve been doing against the junkets.”
Before the crackdown on the junket’ business in Macau, they had two-thirds of the market share at one point. This move is considered a “transformational change.”
According to the latest update, in the first quarter of the year, the Macau VIP market share is about 25 percent, marking an increase from 23.4 percent in 4Q23. However, this figure still falls significantly short of the 46.1 percent share recorded in 2019.
Most VIP revenues are currently generated through Macau’s concessionaires’ direct VIP programs.
Gushin notes that before the crackdown on junkets’ business in Macau, the GGR was “artificially inflated.” According to the gaming regulator’s data, the number of licensed junkets in Macau has been reduced by half to only 18 in 2024, down from 36 last year and a peak of 235 in 2013.
The aggregate of Macau casino GGR for the first quarter of 2024 stood at MOP57.33 billion ($7.11 billion), including other gaming activities such as horse racing and lottery. The market-wide GGR stood at MOP57.5 billion ($7.13 billion) in the first quarter of the year.
The gaming expert anticipates that Macau’s GGR will continue to grow but will never return to its previous levels, indicating that the former junket business was “highly questionable.”
Macau’s former junket king, president of Suncity Group, Alvin Chau, said during the trial in 2022 that all the VIP rooms and the halls of the concessionaires in Macau had under-the-table betting.
Also referred to as side betting, under-the-table betting is a practice where VIP players make agreements with junket operators to wager significantly larger amounts on each hand than the chips visibly on the table represent.
Although Macau’s recovery has been satisfactory to the operators, Goldman Sachs estimates that Macau’s 1Q24 GGR still stands at 75 percent of the same period before COVID and the crackdown on junkets. This situation continues to indicate that the Macau gaming industry is still recovering from the absence of the junket business.
Gaming companies’ stocks drop
Macau gaming stocks have collectively experienced declines for five consecutive days. According to the report, the decrease may be associated with the approvals of gaming credit laws in Macau.
Galaxy Entertainment Group‘s stock price dropped by 7.07 percent on Wednesday, and over the span of six days, the stock plummeted by over 15 percent.
Similarly, Sands China‘s stock also decreased by 3.35 percent. In five days, the stock experienced nearly a 15 percent decrease.
