Tiny Chinese Enclave Remakes Gambling World

By Hannah Dreier

LAS VEGAS -- Most people still think the U.S. gambling industry is anchored in Las Vegas, with its booming Strip and 24/7 action, a place where years of alluring marketing campaigns have helped scrub away the taint of past corruption.

In just a decade, however, the center of gambling has migrated to the other side of the world, settling in a tiny Chinese territory an hour's ferry ride from Hong Kong. The gambling mecca of Macau now handles more wagers than all U.S.-based commercial casinos put together, and many of those bets end up swelling the balance sheets of U.S. corporations.

But as U.S. gambling companies have remade Macau, Macau has also remade them.

Chasing riches, these companies have been hit with allegations of improper conduct, prompting investigations and serious questions about how closely U.S. authorities are watching the corporations' overseas dealings, and what, if any, real repercussions they could face. Could these corruption claims revive the specter of gambling's bad old days, when Sin City casinos kept mobsters flush?

"There are some countries where you either have to pay to play and break the law, or you have to not do business there," casino consultant Steve Norton said. "I think the jury's still out on Macau."

Macau is the only place in China where gambling is legal. Each month, 2.5 million tourists flood the glitzy boomtown, most nouveau-riche Chinese who sip tea and chain-smoke as they play at baccarat.

The former Portuguese colony has long been known for its gambling but used to offer a seedier experience, with small-time gambling dens crowding up against textile factories and gangs, prostitutes and money-launderers operating openly. That was the scene in 1999 when China assumed sovereignty of Macau and opened it to outside gambling operators.

"It was a swamp," said Sheldon Adelson, CEO of Las Vegas Sands ( LVS), as he looked back on his early venture in an obscure city where Chinese officials envisioned resorts. "Everybody thought that I was crazy."

Nevertheless, he and the two American competitors that tried their luck there succeeded spectacularly. Now operating four booming casinos in Macau, Adelson described Sands as "an Asian company" with a presence in America. It makes far more in China than in Las Vegas.

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