Internal Affairs has cancelled the gambling operator's licence of a trust which operates 117 gaming machines and provided nearly $3 million in grants in the latest year.
The trust was found to have supplied false or misleading information about three trotting club loans, which had been used to establish Bluegrass Trust, the department said.
The trust was also considered to have breached the Gambling Act by knowingly receiving funds, with conditions attached, from potential grant recipients.
Also a key person was found to be unsuitable because of his previous poor compliance with the Gambling Act.
The Secretary for Internal Affairs cancelled Bluegrass Trust's class 4 gambling operator's licence because he could not be satisfied the gaming machine society was meeting its obligations under the Gambling Act 2003, the department said.
Despite that, the trust continues operating pending a possible appeal by the trust to the Gambling Commission.
The class 4 licence covers gaming machines in pubs and clubs.
Blenheim-based Bluegrass Holdings Ltd was incorporated in June 2009 and trades as Bluegrass Trust, operating 117 gaming machines in seven bars in Auckland, Lower Hutt, Blenheim, Nelson and Christchurch.
Its website said it raised funds primarily for the benefit of racing in New Zealand, although its authorised purpose allowed donations for charitable and sporting purposes.
Bluegrass Holdings' financial statements for the year to March show gaming machine proceeds of slightly more than $7m, while grants for the year total nearly $3m.
Direct gaming costs of nearly $2.6m include around $1.6m of gaming machine duty, $118,000 for the problem gambling levy, and around $750,000 for site rental.
Efforts to contact Bluegrass were not immediately successful.