Side Betting in Macau 5.08

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					                         SIDE BETTING IN MACAU
                        By António Ramirezi and Luís Pessanhaii
  I. Background
Side betting is increasingly an issue of concern for the gaming industry throughout
the world. It unfairly exploits legal bets placed in an authorized casino by conducting
clandestine parallel betting linked to the outcomes and payoffs of the lawful wagers.
Side betting is made possible through a side agreement between the player placing the
legal wager and a third party who promises to cover an additional illegal parallel bet. iii
What appears to be a simple bet placed at a commercial casino might represent
hidden supplementary income to the bettor and the party accepting the illegal bet.
Hence, a single dollar lost or won in a bet at a casino table may well correspond to
two, five, ten or even hundreds of tax-free dollars under an illegal side bet. [Click
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It is clear side betting threatens the gaming revenues of commercial casinos.
Commercial gaming revenue could be significantly impacted if a substantial portion
of the large bets placed by premium players are made under the table through illegal
side betting agreements. Since 2007, approximately 66.5% of the commercial casino
revenue in Macau SAR was generated from the VIP and premium gaming market. As
a result, side betting is of great interest for the Macau SAR.iv
 II. Tax Implications
Casino gaming operations in Macau are subject to heavy taxation on all gross gaming
revenues generated. Casino gaming revenues are by far the most important source of
public revenue for the Macau government. Income of the commercial casinos in
Macau are taxed at a rate of 39%. Casino operators also have numerous duties under
Macau law to ensure full disclosure of sources of revenue. Wagers placed under side
betting schemes do not generate revenues for the commercial casino operators and,
consequently, are never disclosed or subject to taxation. As a result, Macau loses
unknown millions in tax revenue due to illegal side betting.

For gaming operators, side betting at best represents unwelcome and unfair
competition. Side betting lacks public supervision and regulatory oversight which is
applicable to commercial casinos. Additionally, side betting erodes public confidence
and legitimacy in commercial gaming.
III. Gaming Supervision
From a regulatory perspective, side betting is particularly problematic. Side betting
presents an easy route to avoid the strict regulation of access to commercial casino
gaming imposed by law. As a result, side betting potentially allows that unsavoury and
unsuitable parties to indirectly take part in casino gaming. Considering that side
betting is unlawful and subject to criminal prosecution, one should assume that such
parties are fully aware that they are breaking the law and engaging in illegal activities.

Macau's gaming inspection (DIJC) must have the ability and the manpower to develop
more active investigations of side betting. DICJ must be able to cancel junkets
licenses persons who participate in side betting arrangements. It is important for
DICJ to be able to revoke a license of a junket operator who participates on a side
betting scheme. Side betting by any licensed gaming promoter should be considered a
breach of the applicable license terms and a sufficient ground to terminate the
gaming license. Furthermore, all parties involved in side betting should be banned
from Macau's commercial casinos. Typically side betting is associated with junkets
operators; however, casino employees, junkets employees, other patrons also
participate in side betting schemes.
IV. Criminal Law Implications
Macau resorts to criminal law to suppress all forms of underground gambling. Macau
criminal laws punish unlawful gaming, even if it takes place in a licensed casino. It is a
crime, punishable by up to 3 years of prison or a fine, to accept unlawful bets in
licensed casino. It is also illegal to place side bets and is punishable by up to six
months in prison or a monetary fine. Therefore, Macau imposes criminal sanctions
both on those who accept and place illegal bets. Hence, all parties involved in side
betting are liable for criminal persecution. In this regard please see article 7 of Law
8/96/M, 22 of June. Depending on the facts, and if usury is also involved, apart
from the 3 years mention above article 219 of the Macau Criminal Code punish it
with up to 5 years of prison.
 V. Final Remarks
The actual scope of the problem from side betting is difficult to assess. Side betting
agreements tend to be done in outmost secrecy and parties taking part in such illicit
betting agreements are aware that they have nothing to gain and everything to lose
from making their arrangements public. The unlawful nature and exposure to criminal
prosecution of side betting makes it difficult to understand the extent to which
Macau’s gaming market has been cannibalized by side betting.v Moreover, it is
obviously a difficult task to detect and prove that a player is placing side bets in a
casino gaming venue. However, it is in the best interest of the industry to eliminate
side betting taking place in their casinos, as it clearly represents a source of lost
revenue. There is an obvious incentive for the gaming industry to work together with
DICJ to prevent and combat side betting.

We believe that it is important that Macau's gaming inspection and the judiciary police
have a dedicated team to investigate this increasingly problematic phenomenon. It is
also important to understand that to see effective results, a clear message must be sent
by revoking licenses and criminally prosecuting persons who engage in illegal side
betting. Without a clear message that Macau is actively pursuing sanctions and that it
will not tolerate illegal side betting, compliance with existing laws of Macau will be
questioned.




i  Antonio Ramirez is the Managing Partner of Ramirez Law Firm and a member of the International Masters of Gaming
Law. Mr. Ramirez has years of experience in the gaming industry, including previously serving as an in-house counsel
for an American gaming operator in Macau. Mr. Ramirez can be reached via e-mail:
antonio.ramirez@ramirezlawfirmacau.com or by telephone (+853) 2871 6221.
ii Luís Pessanha is a lecturer on the Faculty of Law at the University of Macau, where he lectures in tax and

administrative law. He earned his L.L.B. from the New University of Lisbon, a postgraduate from the Catholic
University of Lisbon and a L.L.M. from the University of Macau. He may be reached via e-mail at luisp@umac.mo
iii Under the law of Macau all such illicit bets shall be null and void, since they have been concluded in violation of the

law. Parallel gaming and betting contracts are unenforceable in Macau courts. Hence, there are no legal means to
compel the losing party to pay out the credits lost under the unlawful betting agreements. Nor it is expected that a party
to an illegal side betting agreement would attempt to enforce the collection of gaming debts through the courts.
iv The bulk of the revenues generated in casino gaming is from “VIP” rooms (the game of choice in Macau is Baccarat).

The gross gaming revenues from “Baccarat VIP” was 10,790 in 2000; 12,755 in 2001; 16,340 in 2002; 22,178 in 2003;
29,783 in 2004; 28,864 in 2005; 36,783 in 2006; 55,762 in 2007 (amounts in millions of patacas - the official currency of
Macau; presently one US Dollar is worth approximately 8 patacas) (see,
http://www.dicj.gov.mo/PT/Estat/DadosEstat/2007/estat.htm#n1).
v There have been sporadic reports in the regional press that Macau’s casinos had lost as much as USD 1 to 2.5 billion in

2007 to side betting (see, namely, NEIL GOUGH, Side-Bet Scams Dwarf Bad Old Days when Mafia ran Vegas, South China
Morning Post, 10 December 2007; NEIL GOUGH, Macau Losing Billions from Betting Scam, South China Morning Post,
10 December 2007; NIGEL HUXTABLE, Macau Casinos are the World's Most Secure: Gaming Inspection Chief, Macau Daily
Times, 29 January 2008). It is difficult to know if these huge amounts are realistic and reflect truthfully the economic
impact of side betting. Public officials tend to point to significant lower figures. It is however clear that the casino
gaming industry of Macau is well aware and rightfully considers side betting as a very serious threat to its profitability.