The West Bromwich MP hailed the end of a "reign of destruction and misery" after the Government agreed to cut the maximum stake on fixed-odds betting terminals (FOBTs).
Labour MP Tom Watson has been campaigning for a reduction in the amount gamblers can put into the machines, dubbed the 'crack cocaine of gambling' in one turn.
And now the Government has slashed the stake for FOBT from £100 to £2 following consultation with the public, pressure groups and the bookmakers.
The betting industry has complained that a cut will cause job losses on the high street.
Mr Watson said: "This announcement signals the end of the reign of destruction and misery that FOBTs have brought on the lives of gambling addicts and their families and communities for too many years.
"It is a victory for cross-party campaigners who have worked tirelessly for this day over many years.
"This won't be a silver bullet for the wider epidemic of problem gambling in the UK but it will go a long way to solving what has been a particular evil for too long.
"It's not often that the Opposition congratulates a government minister but Tracey Crouch has made the right decision today."
The Government said the change was designed to reduce the potential for large losses and cut the risk of harm to both players and the wider community. A timetable for the measure to be introduced has not been announced.
Betting shops have proliferated on high streets and shopping parades across the country, including here in Birmingham, as they have generated more income from the machines as well as traditional sports betting.
Minister for Sport and Civil Society Tracey Crouch said: "Problem gambling can devastate individuals' lives, families and communities.
"It is right 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."
Other measures announced by the Government include:
- The Gambling Commission to toughen up protections around online gambling including stronger age verification rules and proposals for customer spending limits
- A multimillion-pound advertising campaign promoting responsible gambling
- Responsible gambling messages to appear for the duration of all TV adverts
- A Public Health England review of the public health harms of gambling
- A review of age limits for National Lottery games at the time of the next licence competition
Brian Chappell, of Justice for Punters, said: "This is a huge decision because the Government has finally recognised that problem gambling is a public health issue that is costing more than the tax income received from gambling.
"These machines were introduced through the back door on to UK high streets. They've been trouble ever since. This decision means the betting shop environment will become safer for staff and customers."
Bookmaker William Hill warned the decision could see around 900 of its betting shops become loss-making, with a "proportion" at risk of closure shortly after the new £2 limit comes into effect.
The group said the stake cut could also hit annual earnings by between £70 million and £100 million.
Chief executive Philip Bowcock said: "William Hill has a long and proud heritage as part of the UK high street and we know how important betting shops are to our customers and their local economies.
"The Government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing."
But Paddy Power Betfair welcomed the move to help improve the sector's image but warned it could hit its gaming revenues by between £35 million and £46 million.
The hit to its profits could be offset by factors including gamblers switching to other games, as well as benefits from less competition as rivals are forced to merge, it said.
Chief executive Peter Jackson said: "We have previously highlighted our concern that the wider gambling industry has suffered reputational damage as a result of the widespread unease over stake limits on gaming machines.
"We welcome, therefore, the significant intervention by the Government today, and believe this is a positive development for the long-term sustainability of the industry."
