Tabcorp Holdings (ASX:TAH) is set to face a range of possible outcomes from a new investigation into money-laundering risks, and the probe will likely remain an overhang for an extended period of time, Jefferies said in a Thursday note.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is probing the company's compliance with anti-money laundering and counter-terrorism financing obligations, citing concerns about the wagering operator's ability to identify and mitigate risks.

"Precedent gaming sector Austrac investigations have been long-dated, costly, and have had significant operational impacts," the equity research firm said, adding that prior probes show the risk can extend beyond punitive fines to operating earnings.

Jefferies expects the investigation to focus on retail gaming, given the recent regulatory scrutiny around slots and casinos and the revival of retail turnover at Tabcorp. It noted that monitoring a retail network of 3,700 locations could be cumbersome and costly.

Tabcorp's operating leverage "has been a core reason for our positive thesis, however in any escalation of the investigation, this could see material operating deleverage," Jefferies said.

It downgraded its rating on the company to hold from buy while cutting the price target to AU$0.93 from AU$1.25.

Tabcorp shares fell 14% in recent Friday trade.