As the government auctions online casino licenses for the first time, foreign companies are expected to dominate New Zealand's internet gambling market.
According to documents obtained by RNZ, local operators are concerned that large overseas companies will erode their market share and transfer gambling profits abroad, affecting their contributions to the community.
Unlike lotteries, TAB, casinos, or slot machines, the holders of successful online casino licenses are not required to pay any money to community groups.
Brooke van Velden, Deputy Leader of the ACT Party and Minister of Internal Affairs, told RNZ that she expects most of the 15 licenses to be acquired by large international gambling firms.
"We don't have a huge online gambling market, so I expect most will come from overseas providers."
However, she said that this could change over time as licenses are not permanent.
"If someone else applies and says 'hey, I can do better,' then it's up to the auctioneer and the Ministry of Internal Affairs to decide who can do better," van Velden said. "If an operator is performing poorly, the Ministry of Internal Affairs can revoke their license at any time."
Van Velden stated that her goal is to create a fair and regulated online gambling market.
The new online casino licenses will be issued under a new system starting in February 2026, marking the first time New Zealand has regulated online gambling.
Currently, New Zealanders can gamble on foreign websites, but operating an online casino from within New Zealand is illegal.
The new law will prohibit operators without a license from offering online casino gambling to New Zealanders, with violators facing fines of up to NZ$5 million.
New Zealand is one of the last developed countries to regulate online gambling.
RNZ obtained hundreds of pages of documents about the new online casino market through the Official Information Act.
The documents reveal that Sky City Casino and TAB have strongly opposed the government's decision to open up the market with 15 licenses.
Last March, Sky City wrote to van Velden, suggesting that only five online casino licenses should be issued and should be restricted to entities with a local presence.
"The safest way to ensure online casino profits are taxed in New Zealand is to allow only New Zealand companies to hold licenses, not foreign companies or branches of foreign companies in New Zealand."
However, van Velden told RNZ that Sky City was looking out for its own interests.
"They are thinking of themselves, right? I'm not here to look after Sky City or any particular casino or brand. I'm here to ensure we have a fair market and a regulated market."
Van Velden also mentioned that tilting the competitive environment towards local operators might violate New Zealand's free trade agreements.
"I've considered whether to prioritize local businesses over foreign ones. I think it's fair to let anyone bid for a license, not just because you've been established in New Zealand for many years, you're necessarily a better operator."
The documents show that TAB CEO Nick Roberts wrote to the Minister for Racing, Winston Peters, stating that issuing more than 10 licenses—even 15—would create an open market.
"An open online casino market would threaten the survival of all local gambling operators, ultimately benefiting multinational companies abroad and leading to a loss of funding for racing and sports," TAB wrote to Peters.
TAB argued that only 5 to 7 licenses should be issued to New Zealand-based entities and strongly criticized that foreign operators do not need to pay community funding.
"If an open market is established, it will allow multinational companies to dominate existing operators in New Zealand, establishing an unsustainable traditional gambling product model, endangering our funding for racing and sports, while gambling profits flow out of New Zealand, exacerbating gambling harm among New Zealand consumers."
TAB told Peters that if this rapidly growing online casino market is legalized in New Zealand and swallows up existing businesses, it would severely impact TAB NZ.
Approved online casino license holders need to pay Goods and Services Tax (GST), a 12% gambling tax, and a problem gambling tax, but are not required to pay community funding.
Earlier this year, the true extent of gambling harm in the South Waikato region was revealed, with slot machine losses amounting to NZ$8 million between 2020 and 2021.
Slot machine owner Martin Cheer, the executive director of Pub Charity Ltd, which owns about 1700 slot machines generating an annual revenue of NZ$125 million, about 13% of the NZ$1 billion slot machine industry, said the current system would severely affect local community funding.
"In fact, in level 4 gambling, 100% of the profits must be donated. In this case, there's no need for donations." He said: "Therefore, local ambulance services, coastguards, or football teams will not receive funding, while the money will flow to overseas shareholders."
According to a Cabinet paper from November 2024, mandating online casino operators to pay community funding might deter them from bidding for licenses.
"If financial requirements are added beyond taxes, duties, and fees, New Zealand will become one of the jurisdictions with the highest tax burden on online gambling, significantly reducing the attractiveness and value of the licenses," the document stated.
"Evidence from abroad shows that operators may exit certain markets to protect their profits due to increased operating costs from tax changes," the Cabinet paper acknowledged.
The paper admitted that community funding might be affected.
"If the shift to a market dominated by overseas operators leads to people no longer participating in TAB NZ or Lotto gambling, it could negatively impact the current community funding stream."
But van Velden said she does not want community groups to overly rely on funding from online casino operators.
"This creates a distorted incentive mechanism where we want to see an increase in gambling within the community because more money is flowing back to the community, and that's not something I'm comfortable with under this law."
Slot machine owner Martin Cheer countered this argument.
"There's nothing more distorted than sending money to shareholders in Russia-Croatia: this money will basically never re-enter New Zealand." He said: "This will take funds out of New Zealand, away from community groups, which is not a way to promote economic growth."
The National Party had promised that by imposing a 12% gambling tax on online casino operators, it would bring substantial revenue to the country, with an estimated annual tax revenue of about NZ$179 million.
However, van Velden stated that the government would not gain much tax revenue from the new system, possibly only about NZ$13 million in additional tax revenue in the first few years, and her main motivation is to enhance the safety of online gambling.
"For me, it's more about how to provide people with a legal gambling channel while protecting them from the most severe harms that online gambling can bring, rather than increasing tax revenue."
