Ladbrokes and Coral may have to offload 350 to 400 high street stores as a condition of their proposed STG2.3 billion ($A4.65 billion) merger, the Competition and Markets Authority has said.

The CMA found the merger could "result in a substantial loss of competition" in the gambling market.

"We've provisionally found that the merger between two of the largest bookmakers in the country may be expected to reduce competition and choice for customers in a large number of local areas," the antitrust regulator's inquiry chairman Martin Cave said in a report detailing its provisional findings.

"Although online betting has grown substantially in recent years, the evidence we've seen confirms that a large number of customers still choose to bet in shops - and many would continue to do so after the merger."

The proposed merger would create Britain's biggest bookmaker with around 4000 betting shops, but the CMA has identified 659 areas across the country where the deal could harm competition.

Cave said punters could lose out from a "reduction of competition and choice" and the deal could also "worsen those elements that are set nationally, such as odds and betting limits".

Ladbrokes and Coral are currently the second and third-biggest betting operators after William Hill.

The CMA is aiming to publish its final report by the end of July.