New Zealanders spend more than $2 million a month in online gambling through offshore operators that do not put any money back into local communities, or have to minimise harm.
A discussion document, released today by Internal Affairs Minister Tracey Martin, outlines four options for reform, some of which include a licensing regime to bring offshore operators into line.
The document said that New Zealanders had spent $381 million in the last 18 months - over $2.1 million a month - through offshore operators.
Martin said she was "absolutely" shocked at the amount of money spent.
"This is big money coming out of New Zealand and we don't know where those gamblers are or if they can afford to do so.
"At the moment they're doing too much of it with people that don't meet any of the three pillars that our onshore online gambling people have to abide by. There's no harm minimisation, no community benefit (paid for by a gambling levy), no trusted provider.
"This is the reason why I'm trying to move quite quickly in this space."
The reforms were aimed to give confidence that New Zealand gamblers were protected.
Currently there are only two legal online gambling providers, the TAB and Lotto, but it is not illegal for New Zealanders to gamble through offshore providers.
Four options are outlined in the document:
• The status quo
• Extend gambling products Lotto and TAB can offer
• Licensing of domestic operators
• Licensing of domestic and overseas operators
The document also includes ways to reduce harm, including education, industry-funded services for problem gamblers, prohibition or tight control of gambling advertising, and industry regulation.
"We also need to assess whether they [providers] sufficiently protect vulnerable New Zealanders, particularly our young people who can spend a lot of time online," Martin said.
Geo-blocking access to overseas gambling sites or banning the use of credit cards for online gambling were also ways to reduce harm.
A licensing model would allow more control and required all operators to apply the three pillars, Martin said.
The UK had a model that licenced both domestic and international providers.
"The biggest challenge there was how do you stop illegal. They were able to stop it through working with the credit card companies. so they cut off their money trail.
"A lot of New Zealanders enjoy gambling and it's not our intention to stop this. However the growth in online gambling challenges our current approach."
The closing date for submissions is September 30.