Millions of dollars for grassroots sports clubs is at risk after a Government warning that amateur sport may not qualify for charity grants from pokies gambling.

The warning, from the Department of Internal Affairs to 33 charitable gaming trusts, comes after a court case which confirmed that the promotion of horse racing was not a charitable purpose.

The judgment in a case last year involving the Travis Trust and the Charities Commission also referred to "amateur sport not being a charitable purpose in and of itself".

Sports clubs and organisations spoken to yesterday were unsettled by news they might be facing an additional struggle for funding.

Some had already received the bad news with applications being rejected.

The charitable trusts written to range from big societies such as the Lion Foundation and Pub Charity to others like the Rotorua-based First Sovereign Trust, which has stopped all pokies money it passes on to sports clubs.

Other trusts are taking legal advice, but money could slow to a trickle for many sporting groups and may even be halted.

Lion Foundation and Pub Charity say they are confident their donations will not be affected, but Internal Affairs gambling compliance director Mike Hall said it wrote to the 33 trusts because "we have identified inconsistencies" between the governing documents of the trusts and the authorised purposes specified on their licences.

DIA spokesman Trevor Henry said last night: "We have written to the societies asking them to consider their positions and regularise their deeds etc, and they are responding to the department and we'll take it from there."

Canterbury Hockey Association chief executive Tim Shannahan said he had received two rejection letters from different trusts, citing the fact that the sport was not "charitable".

A fortnight ago, Waitakere United Football applied for a total grant of $212,000 from the Portage and Waitakere Licensing Trusts.

Its executive chairman, Rex Dawkins, said United was reliant on the trusts' support to continue beyond this season in national competition.

"We put a huge amount back in to the community with coaching programmes in schools, holiday coaching programmes and support to our 12 member clubs.

"Grants filter down to 4000 players in west Auckland and we put a lot of resources into 15 to 19-year-olds, which is a very critical age."

First Sovereign Trust distributed $8.6 million to 597 organisations in the year to June 30.

Shaun Cottrell, of GCA Lawyers, said the trust's difficulty was that amateur sport was not on its own charitable.

"But it is where it is for educational or some other aspect, such as providing sports grounds for underprivileged schools.

"So it's a grey area and the trustees are only making sure they are giving to charity because it's the only prudent thing to do."

He said numerous clubs had applied for grants, which are normally issued monthly, and none was accepted.

The DIA asked trustees and directors of gaming machine societies to get their own legal advice.

But this has resulted in confusion for one society, The Trusts Charitable Foundation, which distributes $21 million a year on behalf of licensing trusts, including the Portage and Waitakere Licensing Trusts.

The society's chairman, Malcolm McElrea, said: "So far, we have conflicting advice and we are seeking further advice."

Rawina Mana, club manager for the Pakuranga Rugby League Club, said she had received an "unbelievable" amount of rejection letters from charitable trusts.

The club, which has 16 teams, has relied on up to $25,000 of grant money a season.

"How are we supposed to survive as a sport?" she said. "What are the kids going to do? They'll have more crime on the streets if all the kids can't play sports."

WHAT HAS CHANGED?
* A court judgment last year found that amateur sport was not "a charitable purpose in and of itself".
* The Department of Internal Affairs has now warned charities which give out pokies money that sports clubs may not qualify for grants.
* It says charity means relief of poverty, the advancement of education or religion or any other matter beneficial to the community.

- additional reporting Beck Vass