Gambling Junkets Part II — The Current State
By: Dragon Inc.
Tags: Gambling, Casino, Blockchain, Cryptocurrency, ICO

Gambling Junkets Part II — The Current State

Gambling Junkets Part II — The Current State

Continuing with our series on our original article is this series, Gambling Junkets Part I — Origins and Past, we will continue our series about Gambling Junkets focusing on the state of gambling junkets today.

As some of the largest junkets for high stakes players are now located and focused on Macau, we will use the current process used in Macau and the shortcomings of that market to explain the current state of the junkets market.

Here is a representation of how the current junket market works in Macau:

The greatest number of players that are attracted to the Macau high-roller games run by the Junkets are from Hong Kong and China. Many of these are rich businessman, some of them even billionaires. One of the challenges they face is getting their money to Macau as there are limits according to Chinese law as to how much money is transferable.

As you can see from the diagram above, once a player has interest in joining a game organized by a junket, a high-roller gamer will inform a junket representative of the volume of stake money that he wishes to have available (as a loan) at the gaming tables. This can be many millions of Hong Kong dollars. The availability of this stake money is achieved by the gamer’s junket agent vouching for his client.

These international networks of agents vet the credit worthiness and suitability of high-roller gamers before introducing them to the VIP junkets operators. Agents receive commission from the junket operators for giving credit to the elite gamer and they are responsible to the junket for any debt collection. It is an expensive and traditional system that carries funding costs and credit risks, which is why the typical fee, including commission for the introducing agent, is 5% of stake volume. As an incentive to have the elite gamer attend, and to ease the gamer’s cost of entry, this stake arrangement cost is picked up by the junket.

Once the player arrives at the casino, there is a process to verify the identity of the player and the amount of the stake. Once this is accomplished, the player is giving NON-NEGOTIABLE chips that can only be used for playing at that casino. There is a turnover requirement, normally of one that the player must play all these chips before he receives negotiable chips that he can use to continue playing or cash out.

Once the player decides to cash out his negotiable chips, he will once again require the assistance of the junkets and their agents to do this and credit their money to their bank account. This can be quite expensive, costing the player 5–7% of the transferred amount.

The Dragon Inc. Whitepaper states:

“Maximum stakes at baccarat tables in a Macau VIP Junket can be as high as HK$ 2 million per play, and daily rolling volumes easily reach HK$ 2 billion, with a junket possibly hosting over 100 elite gamers a day. Most will play baccarat but other games of chance are on offer.

The top 40 VIP junkets account for 80% of the total VIP stake ows, which, according to Bloomberg, for Suncity Group, one of the major VIP room operators, recently surpassed a monthly volume of HK$130 billion (US$17 billion).”

As you can imagine the costs of all these transfers exceed US$1 billion. There are also other risks of security and safety of the transferred funds.

We will continue with the Future of the gambling junkets and Dragon Inc.’s solution to these issues in our next post in this series.