Philip Hammond has blocked a review into fixed odds betting terminals (FOBTs) which could have resulted in millions draining out of the treasury's pocket.
FOBTs allow players to bet as much as £100 every two seconds, and account for much of the in-store income of bookmakers. But concerns over gambling addictions and hefty losses had led the department for culture, media and sport to look into reducing the maximum bets to as little as £2.
Now the chancellor has intervened to bring the review to a close, a Whitehall source told the Daily Mail.
The terminals contribute an estimated £400m to the treasury coffers each year, which would be drastically reduced by setting a lower gambling limit. The source said such a move could be "financially crippling".
Several Conservative manifesto pledges which would have raised money by other means have been scrapped since the party lost its majority in Westminster, leaving the chancellor under pressure to balance the books.
Stuart McMillan, an SNP MSP who led the campaign against FOBTs in Holyrood, urged the chancellor not to backslide on the review after rumours of Hammond's intervention emerged.
"Any money that these terminals earn in no way outweighs the damage that they cause in our communities and to families - there's a reason they are labelled the 'crack cocaine' of gambling," he said.
Bookies which have reported their half-year results in the past week have struck a cautious tone over possible reforms. Analysts said Ladbrokes Coral results would be badly affected by increased regulation, while William Hill is already struggling with a decrease in profits.