Gaming insights Gaming

Chips: are they cash?

This article first appeared in the Sep/Oct 2013 issue of World Gaming magazine.

Esteemed Macau lawyer Luís Mesquita de Melo brings us the second of his regular columns for World Gaming, in which he provides his insightful analysis and opinions to a wide range of legal issues related to Macau and the gaming industry. Here he looks at the value of casino chips and what rights and obligations they imply.

To write about gaming chips in the jurisdiction of Macau is an exercise in what should be rather than what is. In fact, there is no legislation on gaming chips in Macau and, therefore, talking about gaming chips’ legal nature or specific features or its legal regime becomes an intuition rather then a substantiated legal analysis.

One skims through the 50 or so articles of Law 16/2001, which sets out the main legal framework applicable to the gaming operations in Macau and there is not one single reference to “gaming chips”, their nature or use.

We can, however, find a single and brief reference to “gaming chips” in the concession and sub-concession contracts for operating games of chance or games of other forms in the Macau Special Administrative Region, as follows:

“Chips used in the operation of conceded business”

  1. The Concessionaire/Sub-concessionaire must abide by the instructions of the government with respect to the issuance of gaming chips notwithstanding its kind or nature.
  2. With prejudice to the Government’s right to determine a maximum amount, the number of chips issued and put in circulation does not require government approval.
  3. The Concessionaire/Sub-concessionaire guarantees to pay by cash, check or equivalent credit proof for the chips put into circulation.
  4. With respect to all chips put into circulation, the Concessionaire/Sub-concessionaire must keep a solvability ratio and establish reserve funds and abide by prudent rules imposed by the government at any time, in order to ensure the prompt payment of gaming chips.

It is also important to bear in mind that under the concession and sub-concession contracts, all the gaming equipment (which includes the gaming chips) shall revert to the ownership of the Macau government upon expiry or termination of the gaming concession/sub-concession.

With this in mind, let’s try to answer some of the most common questions posed when it comes to gaming chips.

What exactly is the legal status of a chip? Is it cash? Is it like a cheque? Is it just acknowledgement of a debt the casino owes me?
Gaming chips are not currency. Although the gaming chips have no value outside the gaming areas or casinos, the gaming chips are fully interchangeable with money at the casino under the gambling agreement between the players and the casino. This happens for several reasons – namely because they are easier to tally in comparison to currency, they enable the staff to quickly verify the amounts being bet or paid and they contribute towards a casino environment or image that induces play.

As we have said above, the casinos have undertaken a contractual obligation to honor the gaming chips. In this respect, they are fully fungible within the casino and operate as play money, in lieu of currency, for all legal purposes.

This means that, at the end of the day, anyone holding a gaming chip (the non-negotiable chips used by junkets and their players being the exception) is entitled to exchange it for cash at the casino cage without the need to prove ownership (as it also happens with currency).

The players have the right to use the gaming chips, which remain the property of the casino.

Can I take chips out of the casino?
The gaming chips are the property of the entity that owns the casino (in Macau the gaming concessionaire/sub-concessionaire).

The gaming concessions/sub-concessions impose that the gaming equipment that is used for gambling must be located at the property owned by the gaming concessionaire/sub-concessionaire.

This seems to indicate that the gaming chips must not leave the casino or gaming area physical premises.

The gaming chips may only be used at the casino or gaming areas that have issued them.

However, this is very difficult to enforce and it is very common for players to keep chips and take them outside the casino and gaming areas.

Can I use chips to pay other people for goods and services?
In some gaming friendly jurisdictions, it is not uncommon to see that some service providers such as taxis or waiters will accept gaming chips, mostly as tips, and they will certainly be entitled to exchange them for money at the respective casino cage.

This is, though, totally discretionary, as the gaming chips are not considered currency, in legal terms, and do not grant the respective holder the right to use them for any other purposes than gambling.

If I physically lose chips, and someone else finds them, can I demand them back? Can I demand the casino doesn’t cash them?
Like in relation to any other object, the legitimate holder of a gaming chip, having acquired the right to use it, can enforce such right against any other person who has illegitimately come into possession of the same.

This also means that the casino must refuse to exchange the gaming chips whenever the casino knows that the gaming chips have been stolen or are not being legitimately used by the person trying to exchange them.

The casino is required to honor the gaming chips and, therefore, must exchange the same back to money when requested to do so by its legitimate holder.

Luís Mesquita de Melo is a partner at MdME Lawyers | Private Notary, a leading Macau full service law firm. To contact Luís, email [email protected]