Woolworths' majority-owned ALH Group, Australia's biggest provider of poker machines, is facing disciplinary proceedings in the wake of the probe into whistleblower allegations implicating dozens of its venues.

The company had been secretly compiling personal details about gamblers such as drink preferences and favourite sports teams in a bid to encourage prolonged pokies sessions and heavier losses, it was alleged.

A series of screenshots, revealed in whistleblower evidence first presented by federal MP Andrew Wilkie in 2018, outlined what actions ALH staff would take to encourage patrons to stay gambling.

"Started slow, picked up after 9," one note said. "Coffees, drink shouts and toasties trying to keep them in." They also said staff were rewarded with vouchers when their venues hit betting targets, and were urged to "do whatever you have to do to keep people in the room".

In the first formal action to flow from a government inquiry into the scandal, the New South Wales regulator on Wednesday started disciplinary proceedings against two ALH-run pubs - Westower Tavern in West Ballina and South Tweed Tavern at South Tweed Heads - describing the illegal practice of providing gamblers with free alcohol at the venues as "systemic".

Its investigations across more than 50 venues included covert surveillance, coercive interviews of licensees, staff and other witnesses and reviews of CCTV and records, the regulator said.

"The complaint lodged with the Independent Liquor and Gaming Authority alleges that the practice of supplying gaming patrons free alcohol was systemic at both North Coast hotels," a spokesman for Liquor & Gaming NSW said.

The action adds to the pressure facing Woolworths to quit the ALH Group - a joint venture between the ASX-listed retailer and billionaire businessman Bruce Mathieson, which operates 330 gaming venues with more than 12,000 poker machines nationally.

Anti-pokies campaigners as well as one of Woolworths' biggest shareholders, Perpetual Investments, have told the supermarket it should ditch the pokies industry, saying it was incompatible with the its expressed values and were a threat to its brand and reputation.

"This is disgraceful conduct from the 'fresh food people' which repeatedly claim to be responsible when in fact they are the worst major pokies operator in Australia - keeping venues open as long as possible, lobbying against reform, plying gamblers with free grog," said Reverend Tim Costello, of the Alliance for Gambling Reform.

"Recently installed ALH chairman and Woolworths CEO Brad Banducci should be fronting up publicly to explain his company's behaviour."

Following the regulator's move on Wednesday, ALH now faces the prospect of penalties including formal reprimands, fines of up to $110,000 and suspension or cancellation of licences.

Mr Wilkie on Wednesday said he found it "implausible" that the misconduct in NSW was limited to two pubs.

"We can only have confidence in the NSW regulator's inquiries if they can assure us that all 50 pubs that were originally under investigation have been thoroughly examined and found to be in the clear," he said.

"The community also needs to see the details of Woolworths' own investigations in its venues."

An internal ALH investigation, conducted by Woolworths in light of the allegations, last year confirmed that staff in 22 of its pubs in three states collected personal information on high-turnover pokies players and shared the data among its pubs to enable staff to encourage them to increase their losses.

A spokesman for ALH Group said the regulator complaints in NSW related to "activities at two of our hotels in 2017".

"An independent of management review into ALH responsible gambling practices was conducted in 2018," the spokesman said. "As a result of the investigation ALH took a number of steps to enhance its responsible gaming practices."

As the matter was now before the Independent Liquor and Gaming Authority, the spokesman said, "we will be making no further comment at this stage."

Independent NSW MP MP Justin Field said the government's investigation lacked transparency and credibility, and "smacks of political interference".

"The government needs to explain to the community and the hundreds of people and families affected by Woolworths' unconscionable conduct why this investigation has now run to over 15 months and what happened to the other 48 venues and the systemic failures acknowledged by Woolworths," he said.

He said the two ALH venues identified in the complaint should be stripped of their gaming and alcohol licences.

"However, the government must also make clear how the ultimate group owner of the venues, ALH-Woolworths, will be held accountable for these systemic breaches," he said.