The Culture Secretary, Tessa Jowell, is facing a possible legal challenge over the Government's plans for 17 new casinos, including Britain's first Las Vegas-style super-casino.
The Gala Coral chief executive, Neil Goulden, said British casino operators could lodge objections to the new casinos on the grounds of unfair competition.
The privately owned company, Europe's biggest gaming group, is unhappy about the imbalance between what the new casinos will be able to offer compared to existing casinos.
The super-casino, for example, will be allowed 1,250 slot machines, with the eight "large" casinos able to run 150 and the new-generation small casinos 80.
That compares with just 20 in Britain's 138 existing casinos.
Mr Goulden said: "The British casino industry is gong to challenge that legally. If three or four of the new generation are in towns where Gala is already, then I think it is unfair competition and we will challenge that legally.
"It will be like being a pub owner and watching a new pub open across the road and being told you can't serve lager but they can."
Rank, the only other major British-owned casino group, declined to comment. Both London Clubs International and Stanley Leisure were snapped up by foreign companies looking to cash in on the expansion. The former was bought by the US company Harrah's Entertainment, while the latter was taken over by Malaysia's Genting.
The locations of the new casinos have been fraught with controversy after the Government was forced to scale back its ambitious plans for eight super-casinos in the face of sustained attacks from the Conservatives, and anti-addiction campaigners.
It had hoped they would generate millions of pounds to regenerate deprived areas.
A visit by the Deputy Prime Minister, John Prescott, to the ranch owned by Philip Anschutz, who wants to build the super-casino at the Dome in Greenwich, caused further controversy.
The bookmaker Paddy Power yesterday reported a flood of bets for Blackpool as the winning venue and now makes it the 8-11 odds-on favourite from 11-10, with the Dome trailing at 11-8 and the other five possible venues at 9-1 or bigger.
A spokesman said: "It is often the case that somebody knows something when you see a weight of money like that."
The former Las Vegas mayor Jan Jones, who is vice-president of communications at Harrah's, said a super-casino in Blackpool would be such a catalyst for regeneration that other regions would want to copy.
"If you can build one resort destination here then you will want to replicate that economic engine," she said. "It is extraordinary what they do."
There is speculation that the Government could try to add more casinos if the new venues prove successful.
Ms Jones has been visiting the UK ahead of the announcement from the Casino Advisory Panel, which will submit its recommendations to the Government on Tuesday.
Harrah's is among 22 companies, including hotel groups and restaurateurs, which have lodged an interest with the local authorities to invest in Blackpool if the resort is successful
Ms Jones insisted that Blackpool was the ideal place for a resort destination. "It is in need of regeneration, but it already has the infrastructure and the distribution facilities," she said.
She added: "Blackpool is a seaside resort - you can build on that, and capitalise on the resort aspect. There would be no point putting a Caesar's Palace there, you need to use Blackpool's history.
"Blackpool can be chic again with beautiful spas and great shopping. It can attract the best designers."
Ms Jones denied casinos were a cause of addiction.
"Gambling addiction is a pathology. It is not something that is created by the casino. Casinos are not interested in problem gamblers."Reuse content