There is an "overwhelming" case to reduce the maximum bet on fixed-odds betting terminals (FOBTs) from £100 to £2 per spin, a trio of MPs has said.
Government estimates suggest a £2 cap could lead to a £5.5bn loss in tax revenues over the next 10 years.
But MPs Iain Duncan Smith, Carolyn Harris and Ronnie Cowan said large tax gains were "highly questionable".
It comes during a consultation on FOBTs by the Department for Digital, Culture, Media and Sport.
In a letter to Chancellor Philip Hammond - seen by the BBC's Victoria Derbyshire programme - the MPs state that in 2015-16 there were more than 230,000 individual sessions in which a user lost more than £1,000.
"This money is often lost by those at the lower end of the income distribution," they said, "and it is highly questionable that the government derives significant machine gaming duty revenue from those that can least afford it."
The MPs have all been part of the fixed-odds betting terminals all-party parliamentary group, which has been scrutinising the use of the machines.
Quoting the Centre for Economic and Business Research think tank, they estimate that the cost of problem gambling in the UK is £1.5bn a year, "when its impact on wider social welfare is taken into account - including areas such as employment, mental health and financial stability".
The MPs said they also feared that the government was "relying upon data... sponsored by the Association of British Bookmakers (ABB)" to assess the possible impact of reducing the maximum FOBT stake on the British economy.
The report, by accounting firm KPMG, has not been made public, but reportedly claims that the proposals would threaten half of the nation's bookmakers shops with closure and put 20,000 jobs at risk.
The MPs said there were "widespread concerns about its validity".
The ABB said: "We recognise public concern over FOBTs and accept that maximum stakes will be cut to address this. FOBTs have the highest customer protections in place of any gaming machine in the country.
"However, cutting maximum stakes on FOBTs from £100 to just £2 would be a disproportionate response. It would mean that people could bet four times the amount per minute on a pub fruit machine in an unregulated environment (£24) than on a betting shop FOBT (£6)."
The Department for Digital, Culture, Media and Sport (DCMS) has now launched a 12-week consultation into cutting maximum bets from £100 to either £50, £30, £20 or £2.
The DCMS has also called for a review of the spin speed on FOBT games, and says gambling companies will need to collaborate on a two-year long campaign to promote responsible gambling.
It is the result of a government review into gambling industry practice, which started in October 2016.
Watch the BBC's Victoria Derbyshire programme on weekdays between 09:00 and 11:00 on BBC Two and the BBC News Channel.