Inside Asian Gaming

INSIDE ASIAN GAMING | September 2008 40 Regulation Macau has been called the Las Vegas of Asia. Since the casino industry in this Special Administrative Region of China has already passed Nevada’s famous Strip in gaming revenue, win per table and handle per machine, perhaps it is Las Vegas that should be dubbed the Macau of the United States. I have a unique perspective on this development. Like many others,I often act as a consultant and expert witness for governments and industry, in North America and Asia. But I also have taught Gaming Law at the University of Nevada-Reno,in China,Spain,France and Slovenia, and every June at the University of Macau. So what lessons can the casino capitals of the world learn from each other? Here are a few: 1) Gambling has to be strictly regulated to keep it honest and prevent scandals. 2) Casino regulation requires knowing who the real owners are and the background of everyone involved in the casino’s operation. 3) Casino regulation also requires keeping track of every dollar, or pataca, that goes in or comes out. 4) And watch the hands that handle the money—that means the dealers and up, more than the players. All these points relate to why we regulate legal gambling at all.Wouldn’t it be easier to just sell the licenses to the highest bidders and then bow out? Most governments don’t do that, in part because they want to make even more money, by selling licenses and then getting a large share of the gaming revenues through taxes. This means that governments haveadirect stake incasinos’profits and are hurt if insiders skim off the top before the profits can be taxed. It also means.. 5) Governments always get greedy and raise taxes if you’re successful. But governments also have a duty to protect patrons. A license is seen as a promise by the government to everyone who enters a casino that they will get an honest game.Oneproblemwhenorganizedcrime (in theU.S.,they call themselves“O.C.”) runs casinos is they have no qualms about rigging games to increase their take. This even happens with disorganized crime: dealers who steal by slipping chips to a confederate will cheat other players, so their tables won’t have suspiciously low holds. The decisionwhether to have casinos is a state,not a federal,issue. But infiltration by O.C. can attract unwanted attention from higher governments. In the 1950s, U.S. Senator Estes Kefaufver held the first televised hearings, which linked Nevada casinos with O.C. The state feared the federal government would step in and kill the industry, so it created the first true regulatory system. 6) Legalization opens the door to an unrelenting push for more gambling: more casinos, additional games, loosening of restrictions on hours, stakes and credit. 7) Regulators start out tough, but can become overly friendly to operators. 8) Over time, almost every decision regulators make is favorable, or at least neutral, to operators. Casino executives often think regulators are against them, since they may turn down nine out of ten requests. But they do grant that tenth request. And since players aren’t organized, regulators’ decisions almost never favor patrons. 9) The first casinos have fantastic returns on investment, due to pent up demand. 10) This leads inevitably to an over-supply and bankruptcies, if there is no limit to the number of licenses. 11) The situation is made worse, because it is impossible to control neighboring jurisdictions. Monopolies are extremely Gambling and the Law ® What Asia Can Learn From Las Vegas, And Vice Versa