The Dutch Council of Ministers has approved plans to open the countryâ€™s gambling market to global competition by 2015.
The approved bill stipulates that companies hoping to set up in the Dutch market will have to apply for a licence and conform with anti-addiction rules.
Operators will pay 20% tax, give 1.5% of revenue to the national gaming regulator and donate 0.5% of revenue to a gambling prevention fund.
Despite the country having granted no online gaming licences, there are still 450 sites where Netherlands residents can illegally gamble.
These sites have had an impact on the state-run gambling monopoly Holland Casino, whose losses may have stimulated the new legislation.
According to the Dutch Financial Times, the government hopes that 80% of these players will switch to the licensed sites in 2015.
The Netherlands is currently home to one state-controlled online sportsbook.