Plans to build a casino in Solihull, Birmingham, have had to be put on hold after ministers said that they could not be pushed through until the supercasino debate involving Manchester and Blackpool is resolved.
Governmental lawyers have warned that decisions on smaller casinos could face a legal challenge if they were made aside from the larger debate.
Culture minister Lord Davies of Oldham said: "The government are in a difficult position because we could be subject to judicial review if we acted on part of the inspector's report and not on all of it."
Until it is decided which of the two cities will be allowed to build a supercasino with up to 1,250 unlimited-jackpot fruit machines, plans for all of the 16 smaller casinos that have been proposed, will all be suspended.
For the sake of the economy in the West Midlands, the NEC Group, which hopes to build the Solihull casino, has called on the government to make up its mind about the supercasino decision.
Solihull's application to build a new casino has already been approved by the Casino Advisory Panel.
Plans to build a casino in Solihull, Birmingham, have had to be put on hold after ministers said that they could not be pushed through until the supercasino debate involving Manchester and Blackpool is resolved.