Shares in book makers have tumbled after The Times reported chancellor Philip Hammond had agreed to a £2 limit on controversial fixed odds betting terminals.
The newspaper said the limit was set to be announced within weeks, after the Treasury signalled its support for the policy, which culture secretary Matt Hancock is keen to implement.
That would be a more stringent crackdown than that proposed by the Gambling Commission, which recommended last month a £2 limit be reserved for slot games. Non-slot games, such as roulette, should have stakes limited to £30, it suggested.
'Having jumped 4% in response to a better-than-expected outcome from the commission in March, sector shares are understandably lower once again on the possibility of the chancellor going even further, to help clamp down on what has been dubbed the "crack cocaine" of gambling,' said Mike van Dulken, head of research at Accendo Markets.
'A governmental decision to reduce stake limits to as low as £2 may represent the worst-case scenario for the sector.'
Michael Hewson, chief market analyst at CMC Markets UK, said the news had sparked fears of a further tax clampdown.
'This has also raised concern that other gambling taxes may rise to offset the loss of tax revenues that this cut would precipitate,' he said.
The FTSE 100 meanwhile rose 15 points, or 0.2%, to 7,413, buoyed by a rally in the shares of BP (BP) and Shell (RDSb), as the oil price traded near the $75 mark on the prospect of renewed US sanctions on Iran. BP was up 2% at 531.9p while Shell rose 24p to £25.99.