How the Allan government secured a $1.1 billion payment through private negotiations
A secret plan to grant the state’s lottery operator a decades-long license extension was drawn up by the state government at least six months before the law was changed to allow the deal to take effect.
The plan first emerged as a result of a “market assessment” researched by former treasurer Tim Pallas that appeared in budget forecasts Amid criticism of the process.
Speaking about the predictions on Tuesday, Gambling Minister Enver Erdogan said that work is already underway on the report, which advocates holding special negotiations with the state monopoly operator The Lottery Corporation (TLC) when it steps into the portfolio in December 2024.
Allan’s government then introduced and passed in June legislation in April 2025 giving Erdogan, as minister, the power to extend the lottery license indefinitely rather than for one year, giving him more space to conduct these discussions privately.
Under these new laws, the Victorian government granted TLC a 40-year extension without a public tender process in exchange for an upfront premium payment of more than $1.1 billion.
On Tuesday, Erdogan told his budget estimates that the idea of these “special bilateral negotiations” stemmed from Pallas and former finance minister Danny Pearson’s decision to make a “market assessment”.
“The commercial advice from the market assessment was that Lottery Corporation was best placed to engage in off-market discussions about a possible extension,” he said.
“The advice I received was that the off-market process was the best process to capture the greatest value.
“If the government did not believe it was of value there was of course the opportunity to seek other parties and consider other offers, but initially this was the plan to proceed with TLC based on commercial advice.”
Erdogan did not object to Hawthorn MP John Pesutto’s question that this meant the open tender process had never been part of the discussions since he became games minister in December 2024.
He said he had not met with anyone from TLC, but did not say whether his staff or department staff had met with company representatives. The negotiations were overseen by integrity consultants and an independent review panel.
“My employees are meeting with various stakeholders in this portfolio,” Erdogan said.
Under the agreement, which has not yet been made public, the government also agreed that there would be no “adverse” consequences; This means that tax rates on lotteries will not be increased further.
Opposition Leader Jess Wilson said it was clear that negotiations for an extension between the government and TLC began before legislation allowing the deal was passed.
“The Labor government changed the law last year to ensure Victorians could make this dodgy deal behind closed doors without confidence that they were getting value for money,” he said.
Tuesday night, Australian He reported that Wilson had written a warning to TLC stating that the Coalition reserved the right to tear up the contract if elected and that he had determined the process was inappropriate or not good value for taxpayers.
In predictions, Erdogan also defended the license extension as it provides certainty to retailers selling lotteries.
These retailers will now receive a 10-year offer from TLC to continue selling their products.
Brendan Tohill, chief executive of the Victoria Authorized Newsstands Association, said he was excited by the certainty and foot traffic these proposals would bring.
Ahead of public hearings on Tuesday, a TLC spokesman 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 lottery retailers, which are largely small businesses, and continue to generate significant lottery tax revenue to fund government and community services”.
Lottery taxes will bring Victoria $632 million in the next financial year, rising to $736 million by 2029-30.
TLC generates $3.7 billion in revenue across Australia in 2024-25; Earnings before interest, taxes, depreciation and amortization were $749.3 million.
When the license was renegotiated in 2017, the gambling commission was asked to assess the adequacy of companies interested in the licence.
This did not happen during the license extension process; The Victorian Gambling and Casino Control Commission has instead consulted on how licensing should be regulated over the next 40 years.
“Our feedback focused on ensuring that license settings support effective oversight, compliance and enforcement throughout the extension period,” a commission spokesman said.
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