New Zealand’s 4% Online Casino Fund Faces Cost Concerns

Key Points

• Officials reckon the 4% set aside from online casinos could bring in around NZ10m to NZ20m a year for local groups.
• The Treasury was dead against the scheme, and officials have now come out and said the costs may indeed outstrip the benefits.
• Good news is that there’ll be some cash flowing to groups by the 2027-28 financial year, bad news is that no one really knows who’ll qualify yet.

New Zealand’s 4% Online Casino Fund in the Spotlight, Officials Question Its Worth

New Zealand has made a big promise to give sports clubs a cut of the cash from online casinos from January 2027, but the officials who came up with the idea now seriously doubt whether it’s a good idea.

Under the Online Casino Gambling Act 2026, 4% of the revenue from online casinos is set aside for community groups. That’s estimated to be anywhere between NZ10m and NZ20m a year, but that’s a forecast and not a guarantee, and it all depends on how many gamblers switch to licensed sites.

How Does This 4% Come About?

The fund isn’t a new tax, it’s just the 4% business going into the pot, with offshore gambling duty going from 12% to 16% on January 1 2027, and that extra 4% being put to one side.

Gross gambling revenue means the total amount bet minus the cash paid out in prizes. It’s the Lottery Grants Board that already dishes out the profits from Lotto NZ, who’ll be handing out this cash as well. A sneaky little amendment to the bill says that each year’s payment will be linked to how much duty was collected the year before.

That little detail has held up the cash flow, duty paid in 2027 won’t start appearing in clubs’ bank accounts until the next financial year, and that’s according to the Lottery Grants Board’s own website.

We still don’t know who is eligible, what the priorities will be or even how to apply for these funds, that was the message from Sport New Zealand back in May to their members.

A Warning Hidden Inside the Government’s Own Report

The analysis that came up with the NZ$20m estimate back in November 2025, that report also warned that even if it does bring in the cash, whether it’s actually worth it is a much tougher one to swallow. Officials pointed out that the benefits of the scheme are basically unmeasurable because their value is unknown.

On the other hand, there are some pretty straightforward costs, like the costs to the operators and government to run the scheme, plus some soft costs like the potential for extra harm from gambling and one specific threat to Lotto NZ.

That Lotto NZ thing is worth pointing out. Lotto NZ pretty much lives off its profits, so if the online casino operators start paying less, then they’ll still be able to claim all sorts of community cred, it’s a bit of a double-edged sword.

The report said as much: “All in all, we think the costs may outweigh the benefits in the long run.” But ministers overruled that advice because they got a lot of public pressure about it. The select committee received 5,007 submissions from 4,837 different submitters, and a whopping 3,966 of them were all about community returns.

A Policy U-Turn in Response to Pokie Worries

The policy goes against an initial Cabinet decision. In July 2024, the Cabinet rejected community returns, stressing that such a funding model encourages dependence and growth in gambling.

Sporting organisations were concerned that online casinos would steal players from pub and club pokies, Class 4 machines, which form the basis of hundreds of thousands of community grants. This concern received an answer in the form of the 4% ring-fence in October 2025 from the Minister of Internal Affairs Brooke van Velden.

Nevertheless, even then, the minister acknowledged the limitations of her response. “I do acknowledge that predicting the exact impact on existing Class 4 [pokies] returns creates some uncertainty,” she stated, quoting from the Otago Daily Times.

And the scale speaks for itself. The Otago Daily Times states that during 2023/24, Lotto NZ paid NZ$434m to the Board, making the online fund a small addition.

Numbers Behind the Estimate

The forecast is based on very limited data. As the offshore casinos reported, they generated NZ520.8m in GGR and paid NZ62.5m in duty to Inland Revenue for 2024/25.

According to the official assumptions, the licensed operators will earn from NZ330m to NZ440m for the year to June 2027, as not all players will move online. This means the 4% ring-fence generates NZ13m to NZ18m of the funds, while Inland Revenue’s NZ520m assumption is closer to NZ21m.

Operators face a significant expense to reach this level. GST is calculated at 3/23rds of GGR, the duty rate stands at 16%, and the problem gambling levy rate is 1.24% of the player expenditure, excluding GST.

Further on, the final regulations introduce the quarterly 3.5% levy on online gambling net profits and the NZ$19,000 expression-of-interest fee.

Licences Come After the Duty Period Begins

The licensing process is underway. According to the DIA’s licensing timeline, the auction took place on 29 September, and the application period opens this month.

As of 1 December, providers who did not apply for the licence should leave the market. Providers who applied can operate without marketing, while the DIA examines their application.

Testing laboratories are already lined up. Gaming Laboratories International announced this week that it became one of the three testing labs, along with Quality Assurance Laboratories and BMM Australia.

The Questions to Which the Two-Year Review Must Have Answers

In addition, the Cabinet has agreed on the need for a review two years into the implementation of the policy to evaluate its impact on other forms of gambling and on community returns. The Department of Internal Affairs will cooperate with the Ministry of Health in assessing whether online gambling displaces land-based gambling.

The good questions are straightforward: has the number of grants under Class 4 fallen, how big has the payout from the new fund been, and when have the funds been allocated?

Expert Assessment

We see the 4% fund as a political commitment masquerading as a funding mechanism. Even government officials were sceptical of it, and the Treasury was strongly opposed to it.

In our view, the story told in the Cabinet document is unambiguous. Cabinet decided not to support community returns in 2024 due to clearly stated reasons but changed its mind after 4,000 submissions.

The question of harm needs more investigation than it has had so far. The same report draws on research indicating that problem gamblers provide 30 to 60 per cent of payouts from community funds.

Should that repeat in the online environment, clubs would get funding from the very individuals who are to be protected by the Act. This is uncomfortable, and we expect gambling harm groups to bring this up repeatedly.

Opponents of online casinos should not be complacent either. Officials could not find any credible evidence of displacement of pokies with online gambling, and most of the relevant international literature speaks of complementarity.

In this case, the consequences are ambiguous for grassroots sport. In case pokie grants remain stable, the new fund is a useful addition; in case they decline, NZ$20m will not make up for the loss.

Our recommendation is simple: look at outcomes, not at intentions. If Class 4 grants go down, and online grants remain low, the whole approach requires reconsideration in Wellington.