Betfair have signed an agreement with British racing which promises at least £40million over the next five years.
Following meetings with the British Horseracing Authority, the Racecourse Association and the Horsemen's Group, the betting exchange will pay 10.75 per cent of all revenues on the sport from their UK customers.
This is in exchange for commitments from the sport concerning a minimum number of fixtures per year and optimising the amount of betting opportunities.
The agreement will replace Betfair's current annual voluntary Horserace Betting Levy payments.
Paul Bittar, chief executive of the BHA, said: “We are delighted that we have been able to reach an agreement with Betfair, one which represents a landmark for both the racing and betting industries.
“It brings many benefits, including substantial and increased guaranteed funding as well as importantly providing certainty for the sport in relation to Betfair's contribution.
“We hope that similar arrangements with other betting operators will follow.
“This agreement has required a high degree of co-operation both within racing, with all the major organisations closely involved in negotiations, and of course with Betfair, who have shown great commitment in their intent to be a constructive commercial partner with our sport.
“We firmly believe both in the value of British racing as a product and the need to work closely with the betting industry for our mutual benefit.
“Government has committed to bringing forward proposals to address the long-standing and damaging flaws in our current funding mechanism.
“We continue to engage fully in this process, but in parallel British racing also seeks long-term commercial deals such as this to assist in the transition to a wholly commercial future.”
Betfair feel the new deal offers wide ranging benefits to the betting and racing industries.
Martin Cruddace, chief legal and regulatory officer at Betfair, said: “This deal is a genuinely historic moment.
“British racing and Betfair have proved it is possible for us to work together on a truly commercial basis,” he added.
“Of course it has not been easy but the end result completely justifies all the hard work.
“We hope that this marks a new era and call on other betting operators to adopt similar agreements to help ensure a strong, healthy and vibrant horseracing industry in this country.
“I would like to personally thank those who have represented racing through this process for the time and energy they have invested to bring about this deal.”
John Penrose MP, Minister for Tourism and Heritage at the Department for Culture, Media and Sport, said: “The Government has always believed there should be a commercial relationship between British racing and betting operators and I pay tribute to all parties for bringing about this deal.
“Betfair's willingness to be the first operator to do a deal is impressive and admirable, as is the commitment of Paul Roy and Paul Bittar's team at the BHA, without whom the deal would not have been possible.
“I hope others will follow swiftly in their wake.”