Betfair, the wildly popular and controversial betting exchange, could be hammered in tomorrow's Budget.

Chancellor Gordon Brown is expected to use his Budget speech to announce an investigation into some online gambling sites. He wants to see changes brought in by summer to tax people making huge bets on the exchanges, the FT reports.

So-called betting exchanges offer punters the chance to bet against each other, not just against the bookie. There are believed to be as many as 1,500 professional punters using Betfair, by far Britain's most popular exchange with 200,000 live accounts. The Treasury believes the 'professionals', who average more than £15,000 a year each in profits, should pay tax as a bookmaker does.

Brown abolished betting tax in 2001, replacing it with a tax on bookmakers' profits. Part of the reasoning behind this decision was revenue being lost to offshore gambling sites.

Betfair put a statement on its site yesterday defending its customers and pointing out that it co-operates with the Jockey Club to identify potentially dodgy bets. It blames commercial rivals for much of the criticism it receives.

Betfair yesterday denied reports that proposed changes to gaming laws had scuppered a planned IPO. The company says that no flotation is in the offing and besides, it supports regulation. The Gambling Bill is currently at committee stage. ®

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