Papers have been filed in the High Court claiming an error of law allows smoking in one of SkyCity casino's lounges.
The Cancer Society, the Problem Gambling Foundation and the Salvation Army have filed a joint application for a judicial review of Ministry of Health guidelines for how it determines an open air space.
They claim an error of law is allowing SkyCity to operate a smoking area within the Diamond Lounge, an enclosed part of its venue.
The groups say when they complained to the Auckland Regional Public Health Service, it carried out tests and ruled that the lounge was an open area.
However, they say the service relied on Health Ministry guidelines, which are inconsistent with the Smoke-Free Environments Act and an error of law was made.
The ministry is aware of the court proceedings and has read the papers filed, but will not comment further.
The Problem Gambling Foundation says open areas where people can smoke inside Sky City Casino only encourage people's gambling addictions by keeping them in front of gaming machines.
It says the time out a smoker takes from sitting in front of a gaming machine is important, as they can reflect on how much money they have lost.
SkyCity casino chief executive Nigel Morrison dismissed the claims on Wednesday, saying it is acting within the law.
"We have all the approvals we have to operate that space. We're not unique - there's probably hundreds of venues around New Zealand that have relied on the Ministry of Health interpreting the act and coming up with a way they see how they define an area of open space."
Mr Morrison says the same provisions apply in smoke-free areas in Australia.