The Capital Markets Authority (CMA) is proposing to tap into betting activities to grow the capital markets.
The CMA made the recommendation on Tuesday as part of its policy proposals for the 2018/2019 fiscal year.
In the proposal, it is urging the government to provide preferential tax treatment to betting companies who pay their clients by buying for them shares in blue chip companies or purchasing Treasury bonds whenever the government issues bonds.
"These are some of the policy issues we are discussing today. Once we discuss them we are going to sit down as CMA and present them to the Treasury. These are just proposals" said Jairus Muaka, who is in charge of strategy and policy at CMA.
Luke Ombara, CMA's director of policy and strategy, said that rather than compete with betting industry, the regulator will be trying to leverage from it in order to "inculcate some saving culture".
"We have initiated discussions with betting companies to be able to get data," Mr Ombara said.
"We are looking at the figures we are seeing on daily basis - Sh100,000, Sh1,000,000. This is a substantial amount which could be mobilised into savings," he added.
The CMA is also proposing that preferential corporate tax treatment to attract equities listing at the NSE be implemented across all the existing market segments on a pro-rata basis.
Applicable rates will be proposed by stakeholders based on the percentage of shares issued to the public irrespective of which market segment (including GEMS).