New Jersey Governor Chris Christie won't support casinos in north Jersey unless there is a state takeover of Atlantic City finances.
He also doesn't believe voters will approve the new casinos without such a takeover.
A referendum on the creation of two new casinos in north Jersey is scheduled for November.
Atlantic City is the only area of New Jersey where gambling is currently legal but the market has struggled in recent times, with four of its 12 casinos closing in 2014.
Atlantic City Mayor Don Guardian says the city will officially run out of money by 9 April unless an aid package is agreed.
Christie says he will sign the PILOT aid package providing it includes legislation allowing the state to assume control of key functions of local government.
Local officials oppose the takeover on the grounds that it goes too far.
Christie has previously come out in favour of north Jersey casinos and even helped broker a deal for the referendum.
However he now says that if Guardian and Assembly Speaker Vincent Prieto don't support the state takeover they run the "very real risk" of losing his support.
"I will campaign across the state against the referendum if this is what happens – and I'll make sure it's defeated," Christie told a news conference.
He added: "There is no way voters will approve the expansion of gaming when the only place where gaming has been allowed goes down the toilet."
"Atlantic City is headed for a disaster and north Jersey gaming is headed for a defeat if we don't get our act together.