London-listed gambling shares fell sharply on Monday as investors reacted to rumours of a looming tax raid on the sector.

Ministers are plotting changes ahead of the 30 October budget that would see £3billion raised from the sector to help plug Britain's fragile public finances, according to the Guardian.

The newspaper reports that plans under consideration would double some of the taxes levied on online casinos and bookmakers.

Coral and Ladbrokes owner Entain was the biggest faller on the FTSE 100 in early trading, with shares plummeting almost 14 per cent in early trading to 661.8p.

Shares in Paddy Power and Betfair owner Flutter was down more than 7 per cent to 17,205p.

Both companies have been buoyed in recent years by a boom in sports betting.

The UK's sports betting market is worth £3.5bn and is expanding at the rate of 4.5 per cent a year, but the prime focus is the US where industry revenues are expected to grow to $18billion by 2027.

Flutter rising to become a key player in the rapidly expanding US market via its Draft Kings and Fan Duel businesses.

Meanwhile Entain has built a presence in the US via its join venture with MGM Resports, Bet MGM.

Flutter shares are still up by around 28 per cent over the last year, spurred by optimism over the outlook, adding more than 130 per cent over the last five.

Entain shares have fared less well, falling more than 30 per cent over the last year despite forecast-beating performance as the group suffers the impact of growing regulatory pressure in some key markets.