Betfair have signed a commercial agreement with the organisers of British racing, promising at least £40million worth of funding 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% 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, with the agreement taking effect from the 51st Levy Scheme covering 2012-13.

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."

Bittar added: "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."