A schism has opened up at the heart of the £11.5bn-a-year gambling industry, after senior figures in horse racing broke ranks and signalled they would no longer object to tougher taxes and regulation of online casinos.

In a surprise development, likely to cause headaches for multibillion-pound companies such as Flutter and Entain, some of the most powerful figures in racing in effect turned their backs on digital slot machine and casino products.

The breakaway follows nearly six years in which racing has lined up alongside online casinos to lobby against tougher gambling regulation and taxes, under the auspices of an umbrella trade body, the Betting & Gaming Council (BGC).

The split emerged during a meeting convened by the Social Market Foundation (SMF) thinktank attended by officials from the Treasury, MPs, directors of leading racecourses and the British Horseracing Authority.

The Guardian understands the main topic was a government proposal to harmonise the rates of duty applied to different types of gambling.

Racing industry figures are understood to have warned that raising taxes on racing from 15% to match the 21% remote gaming duty (RGD) levied on online casinos would have dire consequences.

With Treasury officials listening, some of the most powerful figures in horse racing said that taxing online casinos more heavily, instead of harmonising rates, could raise revenues and help drive punters back towards the “sport of kings”.

This, they argued, would also increase receipts from the separate horse racing betting levy, a 10% duty on bookmakers’ income that funds the sport.

Speaking after the event, Martin Cruddace, chief executive of Arena Racing Company, which owns courses including Doncaster and Chepstow, said: “It is imperative that British horse racing continues to make the clear case that betting on its sport is taxed and regulated differently from online casino and arcade games and even other sports.

“Any harmonisation of tax between online casino and horse-race betting would have the consequence, however unintended, of Britain being a world leader in online casino and a world pauper in the global sport of horse racing.”

Attitudes within racing have been hardened by growing concern that the sport has been tarred with the same brush as addictive online casino games.

One submission to the SMF’s event, from another big racing company, said: “The operational costs of these online casinos are minimal, their direct contribution to the local British economy is virtually nonexistent, and the potential for significant harm is, frankly, staggering.”

The schism is likely to cause problems for the BGC and its members, who have raised the spectre of harm to traditional horse racing to argue against measures affecting the wider gambling sector, including higher taxes or tougher affordability checks on punters.

One gambling industry source hit back at racing and the event’s organisers, saying: “The SMF has previously demanded affordability checks at £100 a month, now they want racing to thrive. Which horse are they backing?”

The BGC played down suggestions of a schism, saying it was aligned with horse racing in opposing harmonised tax rates.

“BGC members contribute £6.8bn to the economy, generate £4bn in tax while supporting 109,000 jobs, but this flawed approach can only lead to a spiral of decline,” said a spokesperson.