The decision will break the stranglehold that Canberra's clubs have had on poker machines, and will come as a major blow to the clubs, who have been fighting the casino's bid for poker machines and argued their livelihoods are at stake.

But Chief Minister Andrew Barr has rejected the casino's bid to take over Canberra's convention centre, saying the centre will remain in public hands. And he says the casino must come back with a revised redevelopment proposal for the 200 machines. He also rejected the casino's request that the machines come on top of the 5000 already operated by clubs in the city, saying the casino would have to buy them from clubs under the existing cap.

There was speculation on Thursday that the Labor Party-owned Labor Club might sell to the casino, but Labor Club chief executive Arthur Roufogalis did not return calls on the subject, and the club's board has already passed a resolution saying it will not sell.

To operate 200 machine, the casino will have to buy 267, since one in four machines are forfeited under the government's trading scheme. It is unclear how much the casino would pay for that number of machines, but each is worth tens of thousands of dollars.

Clubs have remained tight-lipped about sale prices to date, but hotels have sold machines for about $18,000 each. That would mean around $5 million for whichever club sold machines to the casino. Other club sources have suggested prices much higher, at $50,000 a machine or more.

Tony Fung's Aquis Entertainment bought the Canberra casino in 2014 and last year put a bid to the ACT government to spend $330 million redeveloping it, including two hotels, restaurants, shops and a redevelopment of the nearby convention centres. As part of the deal, the casino wanted the right to operate 500 poker machines.

Mr Barr said 500 machines was "just too many". To be allowed 200 the casino would have to resubmit a new development proposal, pay higher taxes than clubs, make higher community donations than clubs, and have more stringent harm minimisation measures than clubs.

Mr Barr said the government would ensure that smaller clubs had the first option to sell machines. He did not explain how that would work.

A redeveloped casino had the potential to revitalise the city with new restaurants, hotels, shops and entertainment, creating new jobs, he said.

"Only once the work is complete ... would the casino be allowed to operate poker machines, assuming clubs want to sell them the licences," Mr Barr said.

The Raiders, who took on lobbyist Richard Farmer to fight the poker-machine request, said allowing pokies in the casino was a broken promise, with the government having signed a deal with clubs at the last election that it would continue to support the "community gaming" model.

General manager Simon Hawkins said the move was a blow not only for clubs but for the staff and for the amenity in suburbs, which would diminish as a result, with less money for sports files and fewer affordable places to eat.

Tradies Group chief executive Rob Docker said, "We've got to live with what what we're given, don't we." But he said the clubs industry should argue for significant concessions for clubs and to ensure that the casino "has no advantage in way way, shape or form".

But the Arko Group, owner of the Kambah Tavern and the Statesman Hotel, welcomed the move on Thursday.

Spokesman and lobbyist Peter Conway said any proposal to open up poker machine licenses was good for Canberra.

"We welcome any proposal that will allow poker machines in the casino," he said.

"We believe that the market should be opened up. It is the Arko Group's belief that the clubs have been behaving in a predatory manner, using the community definition to go after any club that was in any financial difficulty."