Lotto extension was in the works months before laws allowed it

A secret plan to award the state’s lottery operator a multi-decade licence extension was hatched by the state government at least six months before the law was changed to allow the deal to go through.

The plan emerged from a “market assessment” first sought by former treasurer Tim Pallas and revealed in budget estimates amid criticism over the process.

Speaking at estimates on Tuesday, Gaming Minister Enver Erdogan said by the time he stepped into the portfolio in December 2024, work on the report was already underway that advocated for private negotiations with The Lottery Corporation (TLC), the state’s monopoly operator.

The Allan government then introduced laws in April 2025 – and passed them in June – that gave Erdogan powers as minister to extend the lottery licence for an indefinite period, up from one year, and gave more scope to conduct these discussions in private.

Under these new laws, the Victorian government has since awarded TLC a 40-year extension without a public tender process in return for an upfront premium payment of more than $1.1 billion.

On Tuesday, Erdogan told budget estimates that the idea for these “exclusive bilateral negotiations” originated from a decision by Pallas and former finance minister Danny Pearson to conduct a “market assessment”.

“The market assessment’s commercial advice was that the Lottery Corporation was best placed to have off-market discussions about a possible extension,” he said.

“The advice I received was that an off-market process was the best process to extract the greatest value.

“If the government did not believe it captured value, there was an opportunity to, of course, seek other parties and entertain other offers, but initially that was the plan to proceed with the TLC based on that commercial advice.”

Erdogan did not dispute a question from Hawthorn MP John Pesutto that this meant an open tender process had never been part of discussions since he became gaming minister in December 2024.

He said he had never met with anyone from TLC but did not say whether his own staff or departmental staff had met representatives from the company. Negotiations were overseen by probity advisors and an independent review panel.

“My staff meet with a range of stakeholders in this portfolio,” Erdogan said.

Under the agreement, which is not yet public, the government also agreed to no “adverse” outcomes, which means the tax rate for lotteries will not be increased any further.

Opposition Leader Jess Wilson said it was clear that extension negotiations between the government and TLC had already begun before laws allowing the deal had passed.

“The Labor government changed the legislation last year to ensure that they could do this dodgy deal behind closed doors without Victorians having confidence that they got value for money,” she said.

On Tuesday night, The Australian reported that Wilson had written to TLC warning that the Coalition reserved their right to tear up the contract if they were elected and found the process was improper or not good value for taxpayers.

In estimates, Erdogan also defended the licence extension because it provided certainty to retailers who sell lottery.

These retailers will now receive a 10-year offer from TLC to continue selling their product.

Brendan Tohill, chief executive of the Victorian Authorised Newsagents Association, said he was excited about the certainty and foot traffic these offers would bring.

On Tuesday before the public hearings, a TLC spokesperson said the extension would allow the company to “continue to responsibly deliver our national portfolio of trusted and popular games to Victorians, support and invest in more than 800 largely small business lottery retailers and continue generating significant lottery duty revenue to fund state and community services”.

Taxes on lotteries will bring $632 million into Victoria next financial year, increasing to $736 million by 2029-30.

Across Australia in 2024-25, TLC brought in $3.7 billion in revenue, with earnings before interest, taxes, depreciation and amortisation of $749.3 million.

When the licence was renegotiated in 2017, the gaming commission was asked to assess the adequacy of companies that had registered interest in the licence.

This did not take place for the licence extension process, with the Victorian Gambling and Casino Control Commission consulting instead about how the licence should be regulated over the next 40 years.

“Our feedback focused on ensuring the licence settings support effective oversight, compliance and enforcement over the extension period,” a commission spokesperson said.

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