POKER machine numbers in South Australia will be cut by 3000 if recommendations of a report by the state's gambling watchdog are carried by Parliament.

The report of the Independent Gambling Authority's inquiry into gaming machine numbers has recommended a cap of 12,000 machines -  a reduction of 20 per cent on current numbers.

"If the prevalence of problem gambling does not reduce within 18 months, further reductions will be necessary," the report states.

"Gambling has permeated our culture, causing serious problems for 22,000-odd problem gamblers and consequent harm to families and people in the community," IGA chairman Stephen Howells said.

"There is clearly a key connection between availability and access and problem gambling and related harm - the cost to the community at large has gone too far," Mr Howells said. Venues will be allowed "limited tradeability" rights, "on limited terms and in limited zones".

The IGA hopes to reduce the number of machines in more than 600 regional venues.

"There is a disproportionate number of machines, and of problem gamblers, in provincial cities," Mr Howells said.

Australian Hotels Association SA General Manager John Lewis branded the recommendations as "Christmas window dressing". "The cap in itself hasn't reduced problem gambling - there are less machines in Victoria but a higher level of problem gambling," Mr Lewis said.

"What's the point of inconveniencing an industry, and possibly sending a lot of country hotels broke? This will mean the end of some country hotels that have invested in good faith."

The hotel industry employs 25,000 people in SA, with an investment in excess of $3 billion. Mr Lewis said about 4000 jobs had been created as a direct result of gaming.

Mr Lewis said the AHA "wouldn't rule out" legal action.

The recommendations will go before Cabinet and the Parliament in the new year. Gambling Minister Jay Weatherill said the IGA had produced "the most extensive report ever undertaken into poker machine numbers and their relation to problem gambling in this state".

"We should be clearly focusing on problem gambling as a priority - revenue is important but our focus should be on reducing harm as a consequence of problem gambling," he said. "This is a very substantial set of measures, and we will be giving them very careful consideration."

Independent No Pokies MLC Nick Xenophon labelled the report "a poke in the eye to the gaming lobby", saying that "one in 10 South Australians are in some way worse off because of the pokies bug".