The Department for Culture, Media and Sport unveiled plans on Thursday to regulate remote gambling at the point of consumption, not supply, which they said would help protect UK gamblers.
"The current system for regulating remote gambling doesn't work. Overseas operators get an unfair advantage over UK-based companies, and British consumers who gamble online may have little or no protection depending on where the operator they deal with happens to be based," said the minister responsible for gambling policy, John Penrose.
Analysts say the proposals, which will insist that all gaming operators selling into the UK obtain a licence from the Gambling Commission, may pave the way for changes in taxation that could hit the firms.
"People see this as a precursor to taxation on the remote gaming companies," said Nick Batram of analysts Peel Hunt.
"They're creating a legislative structure that makes it easier for the HMRC (tax department) to introduce a tax."
Many betting firms operate from offshore tax havens, including Betfair , the world's largest betting exchange. It followed Ladbrokes and William Hill by moving part of its business to Gibraltar in March .
The Gibraltar tax rate is 1 percent compared with 15 percent in Britain.
Betfair's shares dropped as much as 4 percent on Thursday, while William Hill fell 3.9 percent and Ladbrokes dipped 1.4 percent.
With any new tax laws likely to be at least two years away, analysts saw the impact as longer term rather than immediate.
James Hollis at Evolution said a 15 percent tax rate would translate to a hit of up to 30 million pounds ($48 million) per year to William Hill and Ladbrokes, "representing a clear medium-term disruption". Read More
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