The Department of Internal Affairs is clamping down on charitable trusts that donate money to horse racing, in response to concerns that it is a misuse of public funds.
The trusts concerned distribute money from gaming machines and are expected to give the bulk of those earnings to community organisations.
The government move follows an investigation into the Trillian Trust, which granted more than $900,000 to horse racing from its $5.3 million earnings in the past financial year.
A Department of Internal Affairs spokesperson, Keith Manch, says those donations breached its gambling license and charity registration.
Trillian Trust has since made changes in order to retain its gambling licence, and will not be prosecuted.