Betfair is preparing for a legal battle with Germany's federal states in a dispute over a new gambling regime in Europe largest economy, the Financial Times reports.

Betfair last week filed a complaint with the European Commission, hoping that Brussels will force the German federal states to reevaluate the planned changes in the coming overhaul of the nation's current gambling regime.

According to plans, fifteen of Germany's sixteen federal states are looking to expand the current state monopolies on a number of gambling activities in a move which has been underway for the better part of a year already.

Betfair, however, has argued that the plans to grant a limited number of seven gambling licenses under strict guidelines are protectionist and only serving to strengthen the current state monopolies.

The German states, in turn, argue that in order to combat gambling addiction, they will need to roll out the new regime slowly, deregulating the market in a five-year "experimental phase".

The states will also aim to maintain their current monopolies on the lucrative lottery market, as well as license holders will be burdened by a a 16.67 per cent tax on each bet.

Finallly, German sports betters will be forced to limit their total monthly bets to €750.

These changes have not satisfied Betfair, which stands to enter the German market as part of the expansion, and the company has now asked the European Commission to demand changes to the plans.

"If Germany failed to carry out the necessary amendment, Betfair would like to invite the commission to consider the initiation of infringement proceedings against Germany for breach of EU law," Betfair is quoted for saying.

The company is likely to receive support from a wide array of major online gambling operators, such as Austrian betting giants Bwin.

Bwin last month called the German plans "even more incoherent" than current rules, criticizing the federal states for deliberately failing to comply with European law and for encouraging protectionist measures.