Pedro Cortés Luís Machado August 12 2021 Sports betting in Macau – opportunity to change the games Rato, Ling, Lei & Cortés Advogados | Private Client & Offshore Services - Macau Pedro Cortés, Luís Machado Private Client & Offshore Services Interactions unavailable in preview. IntroductionLegislative frameworkCommentIntroductionThe sports betting industry in Macau – specifically, football and basketball "sports lottery" – is insignificant in terms of gross gaming revenue. It accounted for only MPtc543 million ($67 million) in 2020 and MPtc151 million ($18.8 million) for the first quarter of 2021.(1)Nonetheless, with regard to the handle, the amounts were more significant: MPtc5,731 million ($716 million) in 2020 and MPtc1,725 million ($215 million) in the first quarter of 2021.Although these values may seem insignificant compared with those of casino gaming, sports betting was not affected in the same way as casino gaming by the covid-19 pandemic.Recent amendments to the Macau Slot Co Ltd concession contract (Macau Slot concession contract), which became effective on 6 June 2021, introduced an important development – the change from an exclusive concession model operated by a single entity to a concession model that allows more than one concessionaire of sports lottery.Legislative frameworkUnder Law 16/2001 (Gaming Law), four types of gaming are permitted in Macau:games of fortune and chance – those in which the result is contingent exclusively or mainly on the luck of the player;pari-mutuel – a system of betting on animal racing or a sporting event in which the winners split the total amount bet, after deducting commissions, fees and taxes, in proportion to the amount individually bet;operations offered to the public (lotteries) – those in which the hope of winning depends solely on the luck of the player who buys the ticket; andinteractive gaming – games of chance in which a prize in cash or other value is offered or may be won under the respective rules.Operating these gaming activities is the absolute reserve of the state (or special administrative region). Gaming operations by any other entities are subject to the prior grant of a concession.As to sports lottery, the regime foresees a concession, which, until 5 June 2021, was granted only to a single entity which held the exclusive right to operate sports lottery activities – Macau Slot.The legal framework for operating sports betting is based on the regime of instant lotteries was established by Law 12/87/M of 17 August 1987 (Instant Lottery Law), which defines "instant lotteries" as those in which the prizes are fully or partially fixed when the tickets are issued.The Instant Lottery Law also states that concessions can be granted exclusively thereunder. The Macau Slot operated such a concession until 5 June 2021.A public tender must be made for the award of concessions, subject to the rules set out by the chief executive.No taxes are levied on the tickets and the prizes under the Instant Lottery Law.The right to claim prizes cannot last for less than 90 days, unless a specific validity period is specified in the ticket. The value of the unclaimed prizes will revert to the Macau foundation, unless it exceeds the 45% that must be allocated to prizes or the lottery result, which should have been random, could have been predicted.The first Macau Slot concession contract, executed on 21 February 1989, established the exclusive regime for organising and operating instant lotteries.Nevertheless, it opened the door to the possibility of Macau Slot organising other forms of lotteries (including sports lottery), provided that regulations were submitted to the government for approval. On 5 June 1998, just before the 1998 Fédération Internationale de Football Association (FIFA) World Cup, Macau Slot submitted regulations and requested authorisation to begin exploring a football sports lottery. The authorisation was granted for a period of one year, expiring on 5 June 1999.Despite the fact that the fixed-odds bets allowed under the sports lottery may not technically be seen as an operation offered to the public under the Macau Gaming Law, it provided the legal basis for the operation to start and, to a certain extent, flourish.The following extensions were made:5 June 1999 to 5 June 2004 (five-year extension);5 June 2004 to 5 June 2009 (five-year extension);5 June 2009 to 5 June 2010 (one-year extension);5 June 2010 to 5 June 2011 (one-year extension);5 June 2011 to 5 June 2012 (one-year extension);5 June 2012 to 5 June 2013 (one-year extension);5 June 2012 to 5 June 2014 (one-year extension);5 June 2014 to 5 June 2015 (one-year extension);5 June 2015 to 5 June 2016 (one-year extension);5 June 2016 to 5 June 2021 (five-year extension); and5 June 2021 to 5 June 2024 (three-year extension).The exclusive operation set out in the concession contract – which has undergone several amendments and extensions since the first Macau Slot concession contract in 1989 – was taken out of the current Macau Slot concession contract, meaning that the government can now award more concessions to operate sports lottery activities.Under the Macau Slot concession contract, there are certain payable contributions needed to operate the sports lottery:a premium of MPtc15 million ($1.875 million) – payable upon executing the concession contract;annual rent with a minimum amount of MPtc6 million ($750,0000) for each sport (ie, basketball and football), with progressive tax that may reach 25% (if gross revenue(2) exceeds MPtc100 million, the tax rate is 25%); anda health fund with an initial amount of MPtc2.5 million and further annual contributions of MPtc1 million.According to the Macau Slot concession contract, the government can terminate the contract in the following circumstances:abandonment or unjustified suspension of operations for a six-month period;assignment of operations, partially or in whole, temporarily or permanently, without authorisation;failure to comply with the obligations under the concession contract, including payment of prizes and concession rent, distribution of profits and the provision or enhancement of the security bond; andfailure to comply with the number of employees as agreed with state– specifically, Macau-resident employees.(3)The sports lottery rules are set out in Executive Orders 67/2018 (Sports Lottery Regulations – Betting on Football) and 20/2005 (Sports Lottery Regulations – Betting on Basketball); football and basketball are the only permitted sports lottery betting in Macau.CommentThe recent development in the sports betting market worldwide, especially in the United States, may have impact on what can be seen as a diversification of the gaming opportunities offered by Macau operators.The sports betting activity in Macau is based on the Instant Lottery Law, in a wise interpretation made by the current concessionaire when the request was made in time for the 1998 FIFA World Cup. It is now time to introduce a new law and amend the legal framework for sports betting, enlarging the number of operators as well as the sports in which bets can be accepted.A new policy with a subsequent fresh legal framework may prevent Macau residents and tourists from betting in foreign legal and illegal platforms. It may also be a new source of revenue for the region, diversify the gaming market and, in a way, bring other types of business to Macau, including technological corporations (a market expected to grow in the coming years).For further information on this topic please contact Pedro Cortés or Luís Machado at Rato, Ling, Lei & Cortés Advogados by telephone (+853 2856 2322) or email ([email protected] or [email protected]). The Rato, Ling, Lei & Cortés Advogados website can be accessed at www.lektou.com.Endnotes(1) The Gaming Inspection and Coordination Bureau.(2) Gross revenue under the Macau Slot concession contract is the difference between ticket sales and amounts not received by the Macau Slot under the agreements.(3) This was introduced by the recent amendment to the Macau Slot concession contract, which entered into force on 6 June 2021.