Hainan Island Officials Approve 5 Cashless Casinos
On Hainan Island in the South China Sea, five Chinese-owned hotel-resorts are being prepared to become “entertainment bars“, also known as “cashless casinos”. Gambling is illegal on Hainan Island, but entertainment bars are as close as one can get to casino betting without gambling taking place.
Hainan Island lies 1,700 miles away from Beijing. Located in a tropical region, Hainan is referred to as “China’s Hawaii”. Beijing’s officials are considering turning Hainan Island into a first-class tourist destination.
Two months ago, the government approved sports betting and horse racing on Hainan Island. Local officials would like to introduce proper casino betting into the island — or at least its equivalent in the form of entertainment bars.
Thus, local officials have approved entertainment bars as an experiment. They are calling their local gaming establishments cashless casinos.
What Is an Entertainment Bar?
In an entertainment bar, the player puts down real money on the outcome of a casino game. If the player wins, they receive points instead of cash. Those points can be redeemed at local shops, hotels, and restaurants.
Points are worthless when one leaves Hainan. The points are as good as money in local establishments, so the entertainment bar pays out winnings with virtual cash.
The entertainment bar is a trial balloon for casino gambling on the Island of Hainan, which long has been a tourist destination for Chinese vacationers.
Avoids Money-Laundering Concerns
The ploy by local Hainan officials is a clever one. Cashless casinos allay concerns about money-laundering and capital-outflow risks that plague Macau. Cash does not exchange hands twice at the casino, so money-laundering is no concern.
Also, the points cannot be redeemed outside of China, so capital-outflow is no concern. Two of the major reasons for Beijing’s 2014-2016 crackdown on corruption in Macau are nonexistent in Hainan.
Ben Lee, a consultant at Macau’s IGamiX, said of the cashless casinos, “From our conversations with people on the ground, they are positively excited about the changes that appear to be coming through soon.”
IGamiX has been consulting with Hainan Island hotels and resorts for a decade. Lee says that entertainment bars would be a big draw to Chinese tourists who have never gambled before. Full gambling might intimidate some gamblers, but less direct betting on baccarat might draw interest from certain types of tourists.
Lee added that entertainment bars “would undoubtedly draw mainlanders who have never been overseas to try gaming.”
Entertainment Bars on Hainan
This is not the first time entertainment bars have appeared on Hainan. Five years ago, Sanya Bay Mangrove Resort Hotel opened an entertainment bar on Hainan Island. Players could play baccarat, then use virtual winnings to pay for hotel rooms, jewelry, and iPads.
Local prosecutors shut down the operation in 2014, as the corruption crackdown gained force throughout China. For three years, the case wound its way through China’s court system.
In December, courts ruled that entertainment bars were not illegal, after all. That opened the door for the current moves. Before that happened, though, Beijing officials gave their tacit consent for Hainan Island to give casino betting a try.
Hainan Island: Rival to Macau?
Earlier this spring, Chinese newspapers noted that the Beijing government was considering Hainan Island as a possible casino destination. Hainan needs the additional revenues. The government wants to promote Chinese tourism to the South China Sea, both for economic and political reasons.
The government also considers Macau’s casino industry as a bit of an eyesore. While Macau is a glory to behold and Beijing officials approved the gambling industry there, the success of the enterprise led to ambivalence by the new reformist government. In December 2014, President Xi Jinping visited Macau and told its officials they need to diversify.
Since then, Macau officials have tried to follow Xi’s advice. Gaming revenues have been throttled at times, while officials as recently as this week have called on casino operators to concern themselves with non-gaming revenues. In such an environment, Hainan Island is a reminder that total dependence on gaming revenues can be foolhardy.
Will Cashless Casinos Work?
Cashless casinos are more common than one might think. In the United States, small communities in East Texas and South Texas have gaming machines called 8-Liners. While gambling machines are illegal in Texas, they are legal, if the establishment does not pay cash for winnings. Instead, convenience stores allow 8-Liner winnings to pay for gas, groceries, or lottery tickets.
On the Internet, eSports sites like Unikrn take real money for gameplay, then pay back virtual currency — in Unikrn‘s case “Unicoins”. Once gaming is finished, players can use the Unicoins to pay for merchandise on the Unikrn website.
Even US arcade venues like Dave & Buster’s have a system similar to the cashless casinos. Players pay real money to play arcade-style games, then receive tickets which can be redeemed for prizes. Some state legislatures have challenged whether restaurant-arcades like Dave & Buster’s is gambling or not.