The gambling industry's system for handling complaints is "not working" for consumers, who have raised questions over its independence and transparency, the regulator has found.
Consumers find the complaints process difficult to access and time-consuming to use and there is "a clear need" for both gambling businesses and alternative dispute resolution (ADR) providers to improve their handling of disputes, the Gambling Commission said.
It said: "Our review has shown that currently, the complaints system in the gambling industry is not working for consumers.
"They have found it difficult to access, time-consuming to use, and they question whether it is independent and transparent."
Gambling Commission chief executive Sarah Harrison said: "Our findings present a strong case for the gambling industry to take swift action to ensure the way in which customer disputes are dealt with is fit for purpose, and importantly, places consumers first.
"What we want to see is an industry that values and seeks out feedback from customers, that swiftly and effectively resolves customer complaints and that uses the learning from those customers to raise its standards and deliver ever higher levels of customer service.
"Over the coming months we will be working closely with gambling operators, ADR providers, trade associations, consumers and their representatives.
"We will also be looking at complaints processes in other sectors where redress arrangements may be working better.
"But most importantly, we are also welcoming views on the proposals from consumers directly."
Brian Chappell, founder of the campaign group Justice for Punters, said he was "delighted" by the report.
He said: "By working with the regulator and other bodies like the Competition and Markets Authority we have been able to provide extensive evidence of how bookmakers treat their customers, and it isn't good reading for the industry.
"I would even go as far as to say bookmakers have been doing what they want when a dispute occurs with little respect to the law. Hopefully, this is all going to change now."
In October the Competition and Markets Authority (CMA) announced it would be investigating online gambling companies over claims that firms are making it hard for players to collect their winnings.
The CMA said it would probe complaints from the Gambling Commission of unfair treatment of customers, including hard-to-win promotions and blocks on payouts.