Gaming | Analysts united over negligible effect of proxy betting ban

Gaming analysts are united over their prediction that the ban on proxy betting put into practice earlier this week by the Gaming Inspection and Coordination Bureau (DICJ) will have a minimal effect on casino operators.
As of Monday, new regulation, which was enacted by the MSAR, banned the practice of proxy betting on Macau’s VIP tables. VIP operations in the city will now only accept bets from patrons who are physically present on the premises.
Ben Lee, an analyst from Macau-based gaming consultancy, iGamix, told the Times that he concurs that the impact to casino operators will be negligible.
“I believe that the impact is likely to be minimal,” he told the Times. “Proxy betting only accounts for around five percent of VIP GGR [Gross Gaming Revenue]. Given the thin margins [of casino operators] of around 12 to 13 percent on this revenue, the loss will probably be minimal,” Lee added.
On the weekend, Secretary for Economy and Finance, Lionel Leong, cast doubts over the prevalence of the activity, saying that the purpose of DICJ’s policy was “to be clear about the SAR Government’s stance on this issue.”
“It’s hard to verify whether they’re really betting by phone,” the Secretary stated, but added that it was equally difficult to verify the identity of the bidder when proxy betting occurs, or the source of the funding. It had previously been permitted for the sake of “convenience.”
Proxy betting is also far less prevalent in Macau today than it used to be, Lee told the Times. It has now moved to other areas in Southeast Asia where it seeks to serve the mainland Chinese market.
“The reason for the ban [on proxy betting] has been to tighten something that has been a bit of a grey area in the past,” he said. “Again, the impact will be minimal since most of this activity has already been moved offshore to other areas such as the Philippines and Cambodia.”
VIP GGR in Macau amounted to MOP127.82 billion in 2015. If the estimated 5 percent loss was equally applied to all the gaming operators this would amount to a total loss of around MOP6.4 billion to the industry.
Even with “thin margins of around 12 to 13 percent,” the estimated profit loss to the industry using the figures provided could constitute as much as MOP800 million.
Secretary Leong also told reporters on the weekend that the new regulation conforms with existing legislation in other cities where the gaming industry is well-entrenched.
What the new regulation does represent, however, is another distress signal for a flagging industry that had hopes earlier this year of a rebound or at least a bottoming-out.
While the casino operators may survive relatively unscathed by the new regulation as they increasingly eye the mass and mass-mass market, less can be said for the junket operators who have long been reported to be teetering on the edge.
“Whatever happens to the notional proxy [betting], it will probably be yet another continuation of pressure for the junkets themselves, but it probably is not going to be that significant for any of the [casino] operators,” MGM China’s Chief Executive Grant Bowie said last week.
Catering exclusively to the VIP segment, the junkets have been hit hard by President Xi Jinping’s anti-corruption campaign, which has been effective at frightening away gamblers from the MSAR.
Mainland China does not recognize gambling debts, holding gambling as one of the party’s six vices and officially outlawing it in areas other than Macau. With mounting debts and no legal avenues for recuperating the debt on the mainland, junkets are facing burdening financial pressure,
leading some analysts to speculate that they are considering relocating to friendlier territories.
However, Ben Lee emphasizes that proxy betting also remains “but a small component of their [junket’s] business in Macau.”