The federal government will shut down Norfolk Island's gaming authority amid fears it is open to fraud and corruption.
The authority has issued a number of licences to wagering companies to operate in Australia, including UK corporate bookmaker Ladbrokes.
But an independent review has deemed it "barely viable", finding it was more concerned about raising revenue than fulfilling its role as a regulator.
The report, by Centium Group, said internal controls at the authority were inadequate and could give rise to fraud and corruption.
It was operating in a non-transparent way, was grossly under-resourced and basic controls weren't in place - like governance and reporting structures, a risk register or even controls to prevent conflicts of interest.
Its probity checks on licence applicants was also found to be superficial.
"We recommend that it not continue to operate in its current form," the report said.
Local Government and Territories Minister Fiona Nash said there was no choice but to wind up the authority.
"Centium's report made it abundantly clear that the authority is beyond redemption," she said in a statement.
"Gambling in Australia must be carefully regulated to ensure the integrity of our sport and to protect consumers."
Operators with licences from the authority will have until March 31 next year to get licences in other jurisdictions.
The federal government had already ordered the authority to stop issuing new licences pending the outcome of the review.
It says it will cover the "small shortfall" in revenue as a result of the closure.
