Senator Nick Xenophon has condemned a deal for Adelaide Casino to install an extra 505 poker machines, some getting a more favourable tax arrangement.
He said some pokies would attract a tax take 75 per cent lower than others.
SkyCity's licence is being updated and it will remain the exclusive casino operator in Adelaide until the middle of 2035.
The deal paves the way for a planned redevelopment which will include a hotel, bars, restaurants, roof-top pool lounge and a total of 1,500 poker machines, up from the present 995.
There will be 200 gaming tables, up from 90.
South Australian Treasurer Jack Snelling said the casino would operate under some of the strictest gambling measures in the country.
"These will be very thorough protections and of course all of this will have to be approved by the Independent Gaming Authority as well," he said.
A new tax regime is expected to put an extra $60 million into state coffers over four years.
SkyCity released a statement saying it was pleased to have finalised the revised regulatory and taxation framework for Adelaide Casino, after more than two years of negotiations.
It said it would commit $300 million to redevelopment of the casino into a wider entertainment complex.
Premier Jay Weatherill welcomed the commitment and said the SkyCity expansion would create 1,000 jobs on completion.
"It demonstrates the way in which high-quality public investments in partnership with the private sector can create jobs and opportunities for all South Australians," he said.
SkyCity said as part of its agreement with the SA Government it would ensure there was a system of voluntary pre-commitment on all machines and gaming tables.
It promised to boost efforts to help identify those customers at risk of problem gambling.
'Tax cut' Independent Senator Nick Xenophon said a reduced tax rate for premium gaming areas meant the casino could end up paying less tax per machine than now.
He said the new taxation regime offered SkyCity a financial incentive to entice people to VIP areas where there were exemptions from gambling regulations.
"The casino could end up paying a lot less than we think they will because they will be getting a 75 per cent tax cut when it comes to their so-called VIP room," he said.
"In order to be a VIP you have to spend a lot more money.
"To what extent will that drive the casino's policy in terms of encouraging more people into that VIP room?" Mr Snelling said the Government would ensure South Australians had limited access to the premium gambling facilities.
"Access to these exclusive premium gaming areas by South Australia residents will be very limited to protect against problem gambling," he said.
"They are designed to attract more interstate and overseas tourists to South Australia." Senator Xenophon said problem gamblers would help fund SkyCity's expansion work.
"The fact is this expansion of the casino will be paid for, in large measure, off the backs of problem gamblers and what we'll end up seeing in South Australia is a much more cut-throat gambling market," he said.
"You'll end up having hotels being even more ruthless in their marketing in order to compete with a much bigger casino." Unfair deal Ian Horne of the Australian Hotels Association said the new tax regulations for the casino would hurt clubs and pubs.
"It's hardly a level playing field, many of our hotels pay 61 cents in the dollar plus GST whereas the casino is capped at 41 cents in the dollar plus GST," he said.
Greens leader Mark Parnell said problem gambling was being largely ignored.
"I don't think it's good enough for a government to simply look at the revenue that they might make and say 'well that's OK'," he said.
"The question that the Government should be asking is "Does 500 extra machines and 110 extra gambling tables does that make for a better society?' And if the answer is no, you don't do it." South Australian Council of Social Service executive director, Ross Womersley, said the Government was increasing its reliance on pokies revenue.
"We think that that's a severely conflicted source of income for governments and in fact puts them in a position where they are less likely to intervene, even when intervention is desperately called for," he said.