FOBT stakes are to be reduced to £2 from £100, the UK Government has announced, with culture secretary Matt Hancock describing them as a "social blight".
Along with the stake change the government has announced a number of measures including stronger age verification rules and proposals to require operators to set limits on spending until affordability checks have been conducted.
Remote Gaming Duty, paid by online gaming operators, will be increased "at the relevant Budget" to help pay for any impact on tax revenue.
Hancock said: "When faced with the choice of halfway measures or doing everything we can to protect vulnerable people, we have chosen to take a stand. These machines are a social blight and prey on some of the most vulnerable in society, and we are determined to put a stop to it and build a fairer society for all."
Sports minister Tracey Crouch added: "Problem gambling can devastate individuals' lives, families and communities. It is right that we take decisive action now to ensure a responsible gambling industry that protects the most vulnerable in our society. By reducing FOBT stakes to £2 we can help stop extreme losses by those who can least afford it.
"While we want a healthy gambling industry that contributes to the economy, we also need one that does all it can to protect players. We are increasing protections around online gambling, doing more on research, education and treatment of problem gambling and ensuring tighter rules around gambling advertising.
"We will work with the industry on the impact of these changes and are confident that this innovative sector will step up and help achieve this balance."
The news will be welcomed by campaigners and politicians who have long called for the stakes on the controversial machines to be cut, claiming they cause problem gambling and other social ills.
In turn high street bookmakers have warned that a major cut in FOBT stakes would have severe consequences for their businesses, claiming a £2 stake would result in 4,000 betting shops closing and more than 20,000 jobs lost.
Racing figures have said they are working on the basis of the sport losing £50 million a year in income from media rights and lost levy if large numbers of shops close.
The government's gambling review was launched in October 2016 and its findings supposed to be revealed last spring, but they were delayed by the general election.
Then last autumn the government set out a number of options to reduce the maximum stake to £50, £30, £20 or £2.
Bookmakers launched last-ditch attempts to sway the government, including an advertising campaign emphasising the potential loss of jobs and calling on people to write to their local MP asking for them to urge the government to reject a £2 stake.
Industry figures also said they would accept a "proportionate" stake cut and support a package of additional measures including a statutory levy to fund education, research and treatment of problem gambling and a ban on gambling advertising around football before the 9pm watershed.
The British Horseracing Authority (BHA), on behalf of the British racing industry, issued a statement that welcomed the government’s determination to address the issues raised by problem gambling. We called for change during the consultation and we can see the government has acted decisively.
The Secretary of State has written to the Chairman of the BHA saying he understands this is not a straightforward decision for the horseracing industry and the government wants to work closely with us to address any risks. The government has also said it will consider bringing forward a review of the levy on betting on racing that returns money to the sport.
He says he has asked his officials to look at how a levy based on global bets placed in Britain could work. We welcome this.
We are pleased that the consultation response recognises the special and longstanding relationship between the betting and horseracing industries. We recognise the potential impact on jobs in the betting industry and will work closely together to respond to this decision.
We will issue a full statement when we have read the full details of the government’s announcement.
Additional reporting ThoroughbredNEWS News Desk