British Horseracing Authority Chief Executive Nick Rust has hailed a "truly historic" intention from government to replace the Levy betting system by April 2017.
In a seismic overhaul that could see up to £30million 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 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 tens 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."
Chancellor George Osborne last year proposed a 'Racing Right' to replace the Levy and could further expand on the new proposals in the Budget on March 16 – ironically on Day 2 of the Cheltenham Festival, which is the biggest betting week of the year in racing.
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, with the four bookmakers having agreed to make voluntary contributions from their remote activity.
Other established bookmakers like Ladbrokes, Betfred, Coral, William Hill and Paddy Power have yet to agree to ABP status.
The BHA still intends to build on the ABP scheme, with the aim being "to smooth the transition to the new funding model and to maintain the current level of Levy funding."
Government's proposals have been universally welcomed by most factions in racing, though any replacement system is likely to require approval from the European Union.
But the BHA said it was "confident that this will be achieved" as the European Commission set a precedent by approving a French levy system three years ago.
The Association of British Bookmakers is keen to work in unison with the government and the BHA, but said the proposed new system must be "fair to betting shops."
(BHA)