Macau’s Tighter Casino Controls to Usher in Biggest Shake-Up in Decades

Authorities dropped some proposals in an earlier plan that had raised concern among investors, including the idea of introducing government representatives to directly monitor casinos’ operations and requiring official approval before companies distribute dividends.

Under the draft law, a summary of which was released last week, up to six casino licenses will be granted covering a period of 10 years, maintaining the current number but cutting the tenure for new casino licenses in half. The current concessions are held by the subsidiaries of three Las Vegas-based operators— Wynn Resorts Ltd. , MGM Resorts International and Las Vegas Sands Corp.—and three local rivals. The licenses will expire in June and are up for a rebidding process.

Casino operators have been hard hit by the pandemic, especially in Macau which has sealed the city off from tourists, including many players from mainland China. Income from high-rollers, for years a significant source of Macau’s gambling and tax revenues before the pandemic, dropped due to the tight border restrictions in place as part of China and Macau’s zero-Covid approach to infections.

The U.S.-listed shares of Wynn and Sands fell in 2021 as the pandemic entered its second year, while that of MGM—which has less exposure to Macau—performed better. Wynn and Sands jumped last Friday after the new license terms were first released, and were little changed on Tuesday.

Wynn, MGM and Sands didn’t immediately respond to a request for comment outside office hours.

For more than a decade before the pandemic, Macau’s gambling revenues dwarfed that of Las Vegas. It raked in the equivalent of $36 billion in 2019. That plummeted the following year when the virus hit and recovered slightly to $10.8 billion in 2021. The fast-spreading Omicron variant could continue to hamper efforts to reopen borders this year and cloud the gambling hub’s recovery prospects.

Under the new proposed law, casino operators can be stripped of their licenses on the grounds of national security or the security of Macau. The draft also imposes new restrictions on the junket industry, which are networks of middlemen tasked with recruiting VIP players, lending them money and collecting debts.

The bill is expected to pass smoothly through Macau’s local legislature, which is controlled by pro-Beijing policy makers.

Analysts say the draft provides more clarity after the Macau government’s initial announcement of a reform triggered fears of a crackdown among investors last year, with some of the oversight proposals dropped.

“This shows that the government listened and is being pragmatic about the industry,” said Angus Chan, head of Asia gambling at UBS.

Junket operators had been targeted by China’s anticorruption drive in previous years, but the system faced fresh scrutiny when Alvin Chau, Macau’s highflying junket boss, was arrested late last year over allegations of money laundering and running illicit gambling operations.

According to the proposed changes, junkets must obtain a license from Macau’s Secretary for Economy and Finance and will be limited to working with only one casino license holder. Third-party VIP recruiters will also be barred from running dedicated rooms inside casinos and making revenue-sharing arrangements with casino operators, and are only allowed to earn commissions, the draft said.

Macau’s largest junket operator, Sun City Gaming Promotion Co., previously had high-roller rooms across the city’s major casinos. They shut down after Mr. Chau’s arrest.

UBS’s Mr. Chan said the new rules offer a cleaner system “disallowing junket operators from effectively operating their own casinos within these casinos.”

Write to Elaine Yu at [email protected]