The Sydney Gay and Lesbian Mardi Gras refused to meet with the adult entertainment industry to discuss a partnership offer because it wanted to protect its identity as a "family-oriented festival".
The revelation has added to criticism from within the LGBTQI community that the country's biggest gay pride celebration is too reliant on "corporate money" and projecting a "respectable" image.
Sexpo, the adult entertainment exhibition, approached Mardi Gras organisers last year about a potential partnership, seeking to book a float in the parade and run a stall at "Fair Day", which is held annually in Victoria Park.
But Mardi Gras' then head of partnerships, David Harris, rejected offers to meet, telling Sexpo in an email: "We don't partner with the adult entertainment industry."
"Whilst Mardi Gras is of course a huge expression of gender and sexual identity, we are also a family oriented festival that focuses on social justice issues that affect LGBTQI people of all ages," he said.
Mr Harris said Mardi Gras' corporate partnerships were "largely based around diversity and inclusion programs that companies have to further workplace protections for LGBTQI communities". He said Mardi Gras needed to align its partnerships towards catering for vulnerable young people.
"Often there is an over-fetishisation of our communities that isn't always a healthy environment to grow up in," he wrote in the email. "Whilst the celebration [of] sex and sexuality is something we very much encourage in adults, it's not something we develop strategic partnerships around."
Kevin Mack, who purchased Sexpo last year, conceded the exhibition has lacked engagement with the LGBTQ community in the past. But he said he was amazed to be "written off" by Mardi Gras.
"While Mardi Gras does have a family-inclusive element, it is extremely heavily linked into a sexual world ... far more beyond anything that would happen at Sexpo," he said.
Mardi Gras, which culminates in the parade up Oxford Street this Saturday night, began in 1978 as a political protest which met with extreme police brutality.
The modern parade features different queer subcultures, corporate and political floats as well as statements of sexual liberation. Last year a group called Pride in Protest criticised the Mardi Gras over its sponsorship arrangement with Gilead, a drug company accused of price gouging its PrEP medication in the United States.
Pride in Protest's Evan Van Zijl said they did not support any corporate involvement in Mardi Gras but the rejection of Sexpo was "part of an ongoing problem" with how the festival treated sex and sex workers, because it wanted to be "generally respectable and get that corporate money".
"It has gotten more restrictive," they said. "So long as you're reliant on that good image to get the corporate money, you're going to pick the corporates over your community."
The Sydney Gay and Lesbian Mardi Gras declined to comment, but through its public relations agency noted Mr Harris and former Mardi Gras chief executive Terese Casu have since left the organisation.
Rachel Payne, general manager of the Eros Association, an adult industry body, was concerned Mardi Gras had "made out that the industry is potentially targeting or fetishising queer people".
"It is a little alarming given that across-the-board discrimination happens in the adult entertainment industry, and a lot of the industry is made up of queer people," she said.
Mr Harris said he could not comment as he no longer worked for Mardi Gras.