Ladbrokes, the gambling firm owned by the Hilton Group, had been in talks with BSkyB since July regarding the provision of interactive betting facilities to Sky's array of sports channels.
However, under the instruction of Patrica Hewitt, the Secretary of State for Trade and Industry, the venture had been referred to the the Office of Fair Trading for approval - a move that now sees the two companies abandoning the project.
The proposed alliance would have allowed Sky Digital viewers to place fixed-odds and pools bets and would have given Ladbrokes the exclusive rights for five years to offer gambling on Sky's sports channels, including content such as English Premiership soccer (pictured) and rugby union internationals.
Martin Belsham, chief executive of internet betting firm Blue Square, had been amongst those opposed to the link-up on the grounds of it being anti-competitive, stating that he wanted a 'level playing-field'.
Ladbrokes and BSkyB are still in negotiations with regard to other initiatives.
UK satellite broadcaster BSkyB and gambling agency Ladbrokes have called off their proposed interactive sports betting alliance following a government inquiry.
