Macau casinos to end proxy betting?

macau-proxy-bettingMacau casinos could soon put an end to telephone or ‘proxy’ betting, according to a new analyst report.

Proxy betting occurs when a trusted proxy sits at the casino table, relaying real-time card info to a high-roller located somewhere off the premises, who then decides how much to wager. Hong Kong analysts Sanford C. Bernstein Ltd. issued a report on Tuesday saying they believe proxy betting accounts for around 5% of all VIP turnover in Macau.

But Macau casino operators – particularly those with a US presence – are reportedly growing more nervous that proxy betting violates the ‘know your customer’ principle so beloved by regulators. Sands China put the kibosh on its proxy betting last year, while Wynn Macau initially followed suit then quietly resumed the practice this spring.

The report suggested that MGM China and “potentially” Melco Crown Entertainment could soon ban proxy wagering based on “continued concerns over anti-money laundering compliance.” Should the operators not act unilaterally, the report says Macau’s government “may intervene and force phone betting to stop.”

Macau’s loss will be a gain for other Asia-Pacific casino jurisdictions like the Philippines, which has embraced proxy betting. Combined with its comparatively low tax rate and the fact that Manila isn’t subject to Beijing’s whims, the Philippines is expected to continue to nibble away at Macau’s regional market share.

The Bernstein report offered some statistics that reveal how much of Macau’s yearlong revenue slump has been driven by declining VIP gambling. The report says the number of VIP gaming tables in Macau casinos had fallen by over 200 since 2012, and the pace of decline accelerated in 2014.

The report says the decline was originally driven by operators reclassifying tables from VIP to premium mass, which require no junket involvement and thus are much more profitable for the casino. But last year saw “decreased VIP demand and inability of junkets to meet monthly rolling volumes,” leading to the closure of VIP rooms and the need to shift tables elsewhere.