British Horseracing Authority chief executive Nick Rust hailed a "truly historic" intention from the British government to replace the Levy betting system by April 2017.
In a seismic overhaul that could see up to £30 million (€39m) of additional income plunged into the industry, bookmakers would be forced to contribute to Levy from profits taken in betting shops and online.
Racing has long called for British government intervention against the current system, which was first established in 1961 and still exempts offshore online betting from the Levy.
That could all change next spring as culture secretary John Whittingdale has called for a "level playing field" which would ensure "a fair return from all bookmakers to racing, including those based offshore".
Rust said: “Today’s announcement is one that should prove truly historic. The new funding model will ensure a fair transfer of funding to British racing based on all betting activity on the sport – a link that was first established in law in 1961.
“It meets all of racing’s requirements for a new funding model and can bear fruit in 2017, which is crucial given the significant Levy cliff we face.
“In the longer term, this means greater financial security for the sport, a platform for growth, a huge boost to our participants and more certainty for the 10s of thousands of people who rely on racing for their livelihoods.
“We now have a great opportunity to bring together racing and betting in tackling the sport’s funding issues for the benefit of all parties, and this is something that we are actively pursuing.”
British chancellor George Osborne last year proposed a "Racing Right" to replace the Levy and could further expand on the new proposals in the British Budget on March 16th.
Rust has been working hard to fill the void in the interim after having imposed an Authorised Betting Partner (ABP) policy, which requires bookmakers to pay racing an agreed chunk of the profits they make from racing bets online.
Betfair, bet365, 32Red and BetVictor have so far signed up to the new system. Other established bookmakers like Ladbrokes, Betfred, Coral, William Hill and Paddy Power have yet to agree to ABP status.