The biggest wager for popular fixed-odds betting terminals (FOBTs), which allow gamblers to bet every 20 seconds, will be cut sharply from the current level of £100, the department for digital, culture, media and sport said in a statement.
The decision follows a consultation launched in October previous year after complaints that the machines were highly addictive and had led to gamblers building up big losses.
The decision goes further than the recommendations of a review carried out by the gambling regulator earlier this year, which recommended the maximum stake for FOBTs should be set at or below £30. 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.
Betfred's Mark previously said more than half of Britain's 8,500 betting shops would close, costing 21,200 jobs.
Now punters can place bets of up to £100 every 20 seconds on electronic casino games, which critics say is a spur to problem gambling.
The Minister for Sport and Civil Society Tracey Crouch said: "Problem gambling can devastate individuals' lives, families and communities".
The move comes off the back of a consultation with the public and the industry to ensure that we have the right balance between a sector that can grow and contribute to the economy and one that is socially responsible and doing all it should to protect consumers and communities.
She said: "Following analysis of the evidence received at consultation, £2 has been found to be the stake limit that would most substantially impact on harm by reducing the ability to suffer high session losses, while also targeting the greatest proportion of problem gamblers, and mitigating risk for the most vulnerable players for whom even moderate losses might be harmful".
William Hill (Frankfurt: 633847 - news) has warned that new regulations could leave the company at risk of a foreign takeover and jeopardise 20,000 British jobs.
- The Gambling Commission to toughen up protections around online gambling including stronger age verification rules and proposals for customer spending limits.
It also laid out plans for a major multi-million pound advertising campaign promoting responsible gambling that will be supported by the industry.
And the age limit for playing National Lottery games will be reviewed under the next licence competition.
The reduction will also be linked to an increase in Remote Gaming Duty, a tax paid by online gaming operators, in a bid to protect the amount of income government gets from the industry. "The offer for Ladbrokes Coral Group was structured to address the potential of a £2 max stake outcome and as such the strategic rationale for the acquisition remains unchanged".