A new system that combines local and foreign betting pools and equalises the odds will come into use in the next racing season that starts in September.
This follows passage in the Legislative Council last night of the Betting Duty (Amendment) Bill that is seen as a way of reducing the attractiveness of illegal operators who make money from the difference between odds.
Under the system, local and non-local betting pools will be amalgamated through a process known as two-way commingling that allows the same odds to be offered for the same bet type on a given race.
For example, racing fans in Australia have been watching and betting on Hong Kong's races, but their money goes into a small Australian pool.
Under a commingling agreement, Australian betting operators would send those bets to the much larger and more attractive pools in Hong Kong.
The same would apply to participating jurisdictions around the globe.
The Jockey Club, which has been pushing the legislation, welcomed the new law.
Club chairman Brian Stevenson said yesterday that commingling would help avoid the erosion of government revenue from illegal and offshore operators, which had been making profits on the odds differences between local and non-local betting pools.
Permanent Secretary for Home Affairs Raymond Young Lap-moon said earlier that the amendments would help in the fight against illegal bookmakers. "Any local bettors who used to patronise illegal bookmakers would have legal means to bet on races in overseas territories [or vice versa]," he said.
He also believed the new rules would not attract new gamblers on overseas racing due to language barriers and other issues.
The amendment also removed double taxation for overseas racing fans betting on Hong Kong's races. The Hong Kong government will no longer charge them betting duties from the next racing season.
It also includes a provision that ensures no government revenue loss through a three-year guarantee by the club.
A flat betting rate of 72.5 per cent of receipts of local bets on non-local races will be applied from next season. Annual betting duty receipts arising from such bets will be no less than HK$175 million during the guarantee period of the next three seasons.
Choi Chi-sum, general secretary of The Society for Truth and Light, said there was no way to prove whether the new betting laws would be good or bad for society because the club had always said it would help combat offshore and illegal gambling, but had not given any figures.
A club spokesman said the actual date for introducing the new arrangements had yet to be set.