Revealed: The secret backroom dealings behind $1.1b lotto licence deal

A secret 40-year-extension of Victoria’s lotto licence was in the works for almost three years before it was announced, with The Lottery Corporation convincing the government it should be allowed to pay a premium in return for shutting out competitors for decades.

In a new report released on Wednesday, the auditor-general raised concerns about the lack of transparency surrounding the deal and said there was uncertainty over whether taxpayers could have benefited from a bigger windfall through a competitive process.

But the report did not identify any probity concerns and said the government sought to deliver value for Victorians when it chose to conduct “exclusive bilateral negotiations” with The Lottery Corporation, the existing operator, and collect $1.145 billion for the extension.

TLC announced the shock 40-year deal on May 5 – the day the Victorian budget was released – through an announcement to the stock market. The government was immediately criticised for using the agreement to prop up the budget’s bottom line.

Auditor-General Andrew Greaves found the government believed that it could secure more money this way because TLC was willing to pay significantly more to extend its licence without a competitive process, and to secure a commitment that lotto taxes would not be raised without providing compensation.

A commercial adviser appointed to the process valued the licence at about $1.372 billion, which was $227 million less than finally collected, however the auditor-general cautioned that the higher figure was a “theoretical value” and not a like-for-like comparison to a price set by negotiation.

The report cited internal departmental analysis that said a competitive process was “unlikely to deliver a better outcome than bilateral negotiations”, and that continuing with the current operator would minimise disruption to future tax income.

Greaves did not dispute this but said it was impossible to say which method could have produced a higher payment because the price was not tested on an open market.

“We saw evidence that agencies actively assessed and negotiated proposals advanced by TLC. However, those mechanisms could not replicate the price discovery benefits of a competitive process,” he said.

“As a result, while agencies sought to maximise value within a bilateral framework, it is not possible to know with certainty whether a higher premium could have been achieved under an alternative approach.”

Wednesday’s report outlined the full timeline of events behind the deal for the first time, revealing that TLC initially approached the government in November 2023 with a proposal to pay an upfront premium in return for a 20 to 40-year extension.

The government then authorised Treasury to explore reforms to the current licence, which at the time only allowed for an extension of one year.

These discussions culminated in June 2025, almost a year before the deal was announced, when the government passed laws that paved the way for the multi-decade deal.

Alongside this work, government agencies spent 2024 gauging market interest in the lottery licence and developing a negotiation strategy.

A commercial adviser was appointed, and they argued TLC was likely to pay more for the licence for a range of reasons, including the fact that it was part of a national bloc of lottery corporations that already worked together.

By November, the government decided to proceed with exclusive negotiations, but set a reserve price that would act as a minimum payment. If TLC could not match this floor price, they would revert to a traditional competitive process, with the intention that holding exclusive negotiations were guaranteed to deliver better value.

The auditor-general revealed that TLC was not only willing to pay this reserve price to avoid an open process, but forked out more cash to the state in return for an agreement on lottery taxes. The government promised it would compensate the company if it increased lottery taxes above current levels.

That deal “resulted in a material increase to the premium TLC paid for the licence”, according to the report.

Greaves did not find any significant integrity issues, but said the government’s approach meant the public had limited visibility over key decisions and the reasons behind them.

Departmental chiefs told the auditor-general the secrecy was required for the negotiations to ensure the best value for money. Greaves said these were credible arguments, but that agencies needed to balance these objectives by making sure parliament and the public knew what the government was doing and why they were doing it.

The report recommended Treasury develop new rules that assessed how and when major commercial decisions could be disclosed to the public, which the department accepted in principle.

When the deal came to light in May, it sparked criticism from the state opposition, competitors and anti-gambling advocates because of its length and the fact that there was no public tender process.

Speaking before the report was tabled on Tuesday, Premier Ben Carroll said he was confident that Gaming Minister Enver Erdogan had overseen the negotiation process correctly.

An opposition spokesperson criticised the secretive nature of the negotiations, revealed in a report which came a month after the auditor-general exposed a previously undisclosed levy on public transport fares.