The Government is still negotiating the deal for the $350 million convention centre in downtown Auckland which Mr Key has said will create 900 jobs during the construction phase and 900 jobs when it begins operating.
However, with reports that the Government will amend the Gambling Act to allow Sky City to operate up to 500 more gaming machines, the Problem Gambling Foundation fears the expansion will drive an upsurge in gambling addiction.
Mr Key has dismissed reports of up to 500 more machines as speculation but refused to indicate what the number may be other than to say it was "a small adjustment up''.
He's previously said the Auckland Council's "sinking lid'' policy on gaming machines in pubs and clubs means fewer gaming machines overall.
Mr Key's spokesman today refused to say what date his offer to make a deal with Sky City was made.
Earlier this week, he said Mr Key's diary showed no scheduled meetings with Sky City representatives since July last year.
"Having said that, the Prime Minister attends numerous functions and is quite likely to have come across Sky City representatives at some stage.''
Mr Key was asked last July in a question for written answer from Green MP Sue Kedgley whether he or any of his ministers had met representatives from the casino to discuss changes to the Gambling Act.
He replied: "I attended a dinner with the Sky City board 4 November 2009 where we discussed a possible national convention centre and they raised issues relating to the Gambling Act 2003''.
Mr Key said he was unable to speak for other ministers as to whether they had met casino representatives.
The Green Party has urged Mr Key to scrap the negotiations on a national convention centre and start again.
The Greens said four other parties were known to have put forward expressions of interest, but Mr Key had given an unfair advantage to SkyCity by personally offering them a deal.
Green Party co-leader Metiria Turei said this revealed that the other bidders were unknowingly competing on an uneven playing field.
"With John Key intervening in the process and offering exclusive deals for the casino, the other bidders had no way of ever being able to compete with SkyCity's offer.
"Their bids could have taken on a completely different shape had John Key offered law changes for them too."
Ms Turei said the party was concerned that if the deal went ahead, taxpayers could be exposed to financial risks if it was challenged in court.
"Given the level of public concern for this deal, and the blatant unfairness to other bidders, the only reasonable course for the Government is to start the process again."
The party also called for a greater level of analysis on the proposed deal which included the social costs of increasing gambling opportunities in Auckland.
New Zealand First leader Winston Peters also demanded answers from Mr Key on why he appeared to broker a deal with SkyCity.
"New Zealand companies must abide by the laws of the land but that appears not to be the case if you are mates with the National Party," he said.
"This is a prime example of the Government cuddling up to its buddies and selling off our laws to the highest bidder while ignoring the social cost of problem gambling."
The National Party received a $60,000 donation from Sky City in 2005.
Party donation returns show coalition partner United Future also received $12,000 from the company in the same year.
New Zealand First leader Winston Peters pointed out that Act leader John Banks also received financial backing of $15,000 from Sky City during his 2010 mayoralty bid.
These three parties which received donations from Sky City are the same ones that can ensure the Key-deal gets a majority in Parliament, he said.
The Labour Party has also benefited from SkyCity's donations, receiving $60,000 in 2005.
