The proliferation of "virtual casino" machines in betting shops, offering jackpot prizes of up to £50,000, is to be limited by the Government in a crackdown on problem gambling.

Tessa Jowell, the Secretary of State for Culture, Media and Sport, said yesterday that the spread of the machines in relatively unregulated locations could lead to a significant growth in gambling addiction.

Online betting has grown rapidly in recent years, particularly "internet slot machines", where punters place a stake by credit card and click the reels with their computer mouse. Alternatively people can be offered odds on events on sporting events, such as horse races.

Ms Jowell said in a written Commons statement: "The Government has noted with concern the increasing installation in licensed betting offices of machines, described as fixed-odds betting machines, which enable customers to play virtual casino games for prizes of up to £50,000.

"Our current plan is to introduce new legislation which will be drafted in such a way that those betting machines which in reality involve gaming will be brought within the relevant controls for gaming machines. We take the view that the uncontrolled proliferation of high-prize machine gaming on the high street risks seriously increasing problem gambling."

Under legislation being drafted to overhaul antiquated gambling laws, bookmakers are to be limited to four gaming machines, each offering a maximum £500 jackpot. The laws, expected to be included in the Queen's Speech in November, will have to be written to include online gambling.

The Gaming Board for Great Britain and Association of British Bookmakers are about to fight a test case in the courts to clarify the legal position of the machines. It is unclear whether they are covered by legislation on "gaming machines" or the less stringent restrictions on "betting machines". Ms Jowell said she welcomed any action to bring certainty to the issue, but made clear that the Government would act whatever the outcome of the case.

The Government produced a White Paper, A Safe Bet for Success, last March, hailed as the widest-ranging liberalisation of gambling laws for 40 years. Although it dramatically loosened restrictions on the £7bn a year industry, the Government also moved to curb under-age gambling on fruit machines and set up a tough regulatory body.