NSW Premier Barry O'Farrell says it has been clear from the outset that James Packer's proposed high-roller venture at Sydney's Barangaroo development would not operate as a regular casino.
The premier has told Fairfax Media's BOSS magazine Mr Packer's proposal for a gaming facility will not require a casino licence.
Instead, his VIP-only gaming facility will operate under different legislation that does not allow poker machines.
"What's been clear from day one is that what Mr Packer's proposing is not a full-blown casino as we know the Star operates," Mr O'Farrell said in Sydney on Friday.
He said Mr Packer was looking at the high-roller market, particularly in Asia, and his plan "doesn't involve pokie machines and it will require legislation".
Echo Entertainment, which operates Star Casino at Pyrmont, operates poker machines and table games under a licence established under the Casino Control Act.
Mr Packer's company Crown is arguing this means his proposed venture could begin operating before the expiration of Echo's monopoly agreement.
But Mr O'Farrell shot down the idea on Friday. "Of course, his proposal, if it was successful, if it was legislated for, would not take effect until after 2019 after the exclusivity arrangement with the current operator expires," he said.
Shares in Echo initially slumped to a four-month low, falling 4.4 per cent amid concerns over the new competition.
But it recovered nearly all the losses to end down 4¢ at $3.62. Crown closed at $12.45, up from yesterday's closing of $12.30.
The Premier was also asked whether Mr Packer was facing international competition for a second casino in Sydney.
"If he does, it will be handled through the same process that currently is examining his proposal," Mr O'Farrell said.
"The proposal for additional gaming facilities at Barangaroo is being dealt with at an arm's length by the state government, by a body being oversighted by former Future Fund chairman David Murray.
"It will be assessed on its merits, as will any other proposal and the benefits it might bring to the state."
A spokesman for Mr O'Farrell said the state government had not changed its position on Crown's proposal since it announced it was moving to stage-two consideration last year.
"The existing probity and regulatory oversight arrangements would apply to any new operator," he said.