Sheldon Adelson once said he might invest as much $10 billion in Japan’s casino industry.
Las Vegas casino giants like MGM Resorts International, Caesars Entertainment, and Las Vegas Sands are going public about their need for clarity in the emerging Japanese casino industry. Japan opened hearing on Thursday to discuss potential casino laws, and several US casino execs were in attendance.
Last year, Japan’s national parliament passed the Integrated Resort Bill (IR Bill), which legalized brick-and-mortar casinos for the first time. The December 2016 bill stipulated that specific laws and regulations would be passed this year.
The revenue in an unfettered, American-style casino industry was projected to be $25 billion. Las Vegas Sands CEO Sheldon Adelson and MGM Resorts CEO Jim Murren each said they would invest as much as $10 billion apiece to secure a casino license for Tokyo, Osaka, or Yohohama.
IR Bill Statues and Regulations
As Japanese politicians have discussed building casinos in Japan, a series of stifling regulations threaten to undermine the industry before it launches. Japanese Prime Minister Shinzo Abe wanted a casino industry to generate billions in revenue and create tens of thousands of jobs. What is emerging is a casino industry much less ambitious, though.
American casino executives are starting to send out public signals they are displeased with the process. More than that, they are signalling their once-ballyhooed investments could be significantly smaller, if stricter regulations are instituted.
Steven Tight, Caesars Entertainment’s president of international development, spoke for the entire US-based casino industry when he said, “Our common goal is to see the introduction of world-class integrated resorts in Japan that drive economic, tourism and employment growth. The government policymakers should ensure that the legislative framework doesn’t inadvertently hinder these aims.”
Anti-Casino Regulations
The regulations the Las Vegas casino companies find disturbing are those restricting Japanese mass market players, as well as those targeting VIP high rollers. One amendment would require a $100 entry fee for Japanese residents to enter a casino. Japanese lawmakers want to assure only those citizens who can afford to lose money will gamble, for the sake of social harmony and responsible gaming.
A high entry fee would assure middle class Japanese gamblers would seldom enter a casino — a move some executives believe is designed to protect the pachinko industry. Another regulation would ban ATM machines in and around casinos. This would make it harder for problem gamblers to waste money thoughtlessly, because they would need a cooling off period while finding an ATM machine outside the casino.
VIP high rollers would be targeted, too. For instance, the IR Bill might ban casino IOUs called “markers”, the form of credit Las Vegas high rollers use. If markers were banned, high rollers would need to find another form of credit.
Junket Operators in Japan?
In Macau, that led to the creation of the junket operators — third-party organizers who arrange VIP trips to the Cotai Strip and offer credit to gamblers. Junket operators house private high stakes games in Macau casinos.
To support high roller gambling, Japan might be expected to embrace junket operators, but another amendment threatens to ban junket operators altogether. Chinese mainland courts refuse to allow casinos to collect debts from gambling, so the junket operators turned to organized crime to collect gambling debts.
Japanese casino operators want to eliminate similar enterprises, but gaming analysts suggest the law would do exactly the opposite. High rollers would seek credit from outside sources, so the banning of casino markers and junket operators would lead to an underground economy of Yakuza loan sharks. After years of trying to eliminate the influence of the Yakuza, Japanese lawmakers might open the door to new illegal enterprises.
What Las Vegas Executives Want
US casino executives recommend a Las Vegas-style set of regulations. Legalize casino markers, then allow casino operators to take debtors to court to collect debts. This keeps the business in the light of day, which would make it hard for organized crime to gain a foothold.
The laws above would make it hard for US casino executives to invest nearly as much in Japan’s casino industry. The casino bill currently would make it next-to-impossible for mass market or high stakes gamblers to enjoy casino gambling. In effect, Japan’s residents would be barred from gambling, so the casino-resorts would be glorified destinations for foreign gamblers. International high roller bettors have plenty of other sites to gamble, so there would be nothing special for casino developers to offer — just an expensive development with no natural customer base.
Seth Shulkin on Integrated Resorts
Seth Shulkin, who works with the US Chamber of Commerce in Japan and sits on a task force for integrated resorts, said of the new proposed laws, “There’s just a lot of things the government could get so wrong, that gaming companies will decide it’s not a worthy investment.”
One possible regulation seems to alarm MGM Resorts and Las Vegas Sands more than other others, though. One current law would limit gaming space at resorts to 15,000 square feet — a tiny area, compared to world class destination resorts. The Venetian Macau, the most profitable casino in the most lucrative casino destination in the world, has 550,000 square feet of gaming space.
In short, Japanese lawmakers think they are creating a $25 billion integrated casino-resort industry. In truth, they are creating the conditions for a slots-in-a-box style casino industry. Perhaps Japanese lawmakers of Buddhist Komeito Party want to kill the casino industry with poison pills, but they are doing a good job of it.
“A Facility So Dangerous”
Of course, lawmakers are responding to public opinion. The Jiji News Service released a public opinion poll in July 2017, which showed that two-thirds of Japanese citizens oppose the casino industry. With such widespread antipathy to casino gambling, lawmakers were always likely to craft laws to restrict the industry’s impact on Japanese culture.
Takeo Shibata, who works as a professor at Seigakuin University in Tokyo, summed up the attitudes of a bulk of Japanese residents at Thursday’s hearing. In testimony before the casino panel, Shibata said, “I don’t think there’s any need to establish a facility so dangerous that it needs this much regulation. We can be a tourist destination without casinos and with a clean image that will be reassuring for visiting families.”
