Media watchdog the Australian Communications and Media Authority on Tuesday said Kayo showed gambling advertisements during live sports events outside allowed times, identifying 16 different ads across 267 live sport events between February and March 2023.
Kayo's parent, Hubbl, which is owned by Foxtel, advised the media authority the ads were shown as a result of a system error that affected viewers using iOS applications.
Hubbl has been issued a remedial direction, meaning it has to do an external audit of its systems and if it does not comply could face fines of up to $626,000 per day.
The scale of the error as well as Hubbl's failure to identify the bug was very concerning, Â Australian Communications and Media Authority member Carolyn Lidgerwood said.
"The rules are there to reduce viewer exposure to gambling ads, particularly for impressionable young audiences and those vulnerable to gambling harms," Ms Lidgerwood said.
"In this case Hubbl has let those viewers down."
The finding came on the same day anti-gambling group the Alliance for Gambling Reform released research showing more young men are betting on sport than ever.
The figures, derived from interviews with about 16,000 Australians by Roy Morgan, showed the number of people betting on sports has doubled in five years, with more than one third of all spending on sports betting coming from people with a gambling problem.
The problem was particularly invidious in young men, with more than a quarter of men aged 18-24 and a third of men aged 25-34 now betting on sport.
"These are huge numbers and they highlight how a predatory online gambling industry is ensnaring a whole new generation into gambling," Alliance for Gambling Reform interim chief executive Martin Thomas said.
Federal regulations prohibits gambling advertisements from being aired by online content providers during live sport events between 5am and 8.30pm, including in the five minutes before and after the event.
A parliamentary report chaired by deceased Labor MP Peta Murphy, and released a year ago on Friday, recommended phasing out all gambling advertising over a three-year period.
It's not the first time Kayo has been found to have broadcast gambling ads outside of allowed hours.
The media watchdog issued the streamer a formal warning for showing gambling promotions during an AFL match between Fremantle and Collingwood in May 2022.
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