Macau’s Casinos May Be Holding up to $6.4B in Frozen Junket Funds

The relationship between casino concessionaires in Macau and junket operators has never been exactly amicable, but a sweeping change to the existing laws is not making it any easier. Many of the present-day issues pertain to questionable practices in the past and the present-day realities are something that analysts, including Credit Suisse’s Kenneth Fong, Lok Kan Chan, and Sardonna Fong, cannot ignore.

The Past Comes to Haunt Macau Casino Concessionaires

According to the trio of experts, concessionaires in the special administrative region may be tied to anything between $3.82 billion to $6.37 billion in frozen funds placed by promoters. This comes following rulings against both Wynn Macau and MGM China and it’s possible for the Macau government to step in and seize the funds.

The analysts believe that casinos may be held liable for the deposits made by third-party promotes, or junkets. In one instance last November, Wynn Macau was held liable for the deposit of a high roller gamer who was deprived of $770,000 by Dore Entertainment, the junket, which was working with the property. In other words, casinos can now be liable for any debt that the demise of junket operators has left. While it’s not very likely that all legal motions will succeed in recuperating the sought-after amounts, the risk is not small either.

Based on the Court of Appeal ruling, though, it’s Wynn Macau who must repay the deposit. This uncertainty has made many concessionaires skittish and laser-focused on staying on the good side of Macau’s lawmakers and regulators.

Macau has significantly changed the way it interacts with junket operators, often believed by the central government in Beijing to be tied to the kidnappings of national and exploitation of consumers. As a result, Macau carried out broad changes, including the arrests of prominent junket operator bosses, to name Alvin Chau of Suncity Group and Chan Weng-lin of Tak Chun Group.

No More Unchecked Gambling with Junkets

This beckoned a quick about-turn from the policy that Macau had towards junket operators, quickly slashing the number of licensed operators from nearly 240 to just under 40 today. The special administrative region cautioned concessionaires that they would be liable for their junket operators’ association and expected to enforce good industry practices.

Many have responded by acting skittish and withdrawing from their junket agreements altogether with Sands China and Galaxy Entertainment concluding that the risk of being held liable for a third party’s actions is too steep a price to pay. While VIP customers are an important part of the business model for many concessionaires, a shift towards more direct marketing will now be front and center.

It’s possible that only a few junket operators will remain in action, which could undermine competitiveness, but will certainly bring the industry closer to the way Macau envisions it.