Jul. 2--Here's a bet to consider: Can online gambling overcome legal, technological and social challenges to become a mainstream multibillion-dollar business? 

The odds are improving in the wake of a new Nevada law designed to pave the way for the first legal casino-style Internet gambling in the United States. Even though federal authorities say existing law bans Web casinos, the prohibition is rarely enforced and gambling has become a popular Internet pastime. 

Now, in an about-face, operators of Nevada's brick-and-mortar casinos, which once sought to throttle competition by strengthening the ban, are now racing to join an estimated 1,000 Web sites that cater to several million virtual gamblers and rack up at least $1.5 billion a year in revenues. It is unclear whether Nevada casinos will be forced to challenge federal law to move ahead. 

Regardless, most observers agree that Nevada's new law marks a significant step toward legitimacy for online wagering. After years of discussion, "it may actually come to be," said I. Nelson Rose, a Southern California law professor who advises public officials and the gaming industry. 

Just as it has for music downloading, the global Internet has taken gambling to new heights while setting off intense legal and moral debates. While it has opened borderless vistas for millions seeking online entertainment and presented huge new business opportunities, it challenges American laws written before the cyberage and ignites moral discussions about what's appropriate on the Internet. 

If Harrah's and MGM Mirage, for example, have their way, gamblers from around the world will crowd around their Web sites like they do a hot table Saturday night on The Strip. The early Nevada introductions, expected within a year or two, likely will only allow casino guests to electronically gamble from their rooms or with a handheld device from the pool. 

"The gaming industry is moving closer to the entertainment industry. And at some point we're going to meet," said Anthony Cabot, a Las Vegas attorney who represents casino interests "That point is the Internet." 

Even some gambling critics agree, the virtual chips are out of the bag. Analysts estimate Americans already account for more than half of an estimated seven million Internet gamblers worldwide. Online gambling sites have doubled in the past year, and revenues could easily hit $5 billion in two years, according to a recent report by Bear Stearns. That's about half of the revenues Nevada casinos reported to regulators in 2000. 

An analysis by Nielsen/NetRatings for the Mercury News found gambling sites that involve betting money and their legal cousins, play-for-free lottery and sweepstakes sites, rank second only to television-related sites as the Internet's most popular entertainment destinations, ahead of music, adult and sports sites. 

What's more, online gambling has seemed to escape the bursting of the Internet bubble. Well-known global entities -- including the venerable London retailer Harrod's -- are setting up Internet gambling sites. 

And the popularity of online gambling likely could grow, should brand-name U.S. casinos get in the action. Among other reasons, they would lend legitimacy to a little-regulated activity that now often is operated from a Caribbean island or far-flung country. 

"The times are changing," the Bear Sterns report said. "The days when a few college buddies with a laptop and $150,000 could just move down to the Caribbean and set up shop have ended." 

A virtual tour of existing online gaming sites illuminate the possibilities. A panoply of offerings, from poker to pai gow, already can be played in a multitude of languages. Many use "Vegas" in their URLs. Dozens of portal-like sites have popped up, purporting to steer gamblers to reputable operators. Message boards abound where gamblers post gripes. 

The change of heart by some leaders of the U.S. gambling industry, which led to the Nevada legislation, is a powerful testament to how quickly the Internet can change the economic playing field for all sorts of ventures. 

"We need to move as fast as we can or we are going to lose opportunities to other places in the world," said Cabot, the Las Vegas attorney. 

Technology will be online gambling's key driver, many say. A British-based site already allows a form of peer-to-peer betting, matching gamblers who want to place bets against each other on an event or game. (The Nevada law expressly prohibits online sports betting, except over a private network.) 

In the past year, several of the nation's largest casino operators have signed on with gaming technology companies to develop sophisticated sites to first build customer loyalty by offering play-for-free games. Now they are in a race to meet the "fool-proof" standards the Nevada Gaming Control Board says it will demand to prevent Internet gambling by minors or in jurisdictions, including currently the other 49 states, where authorities say it's illegal. 

For that reason, closed-network gambling is likely to develop first in Nevada, where casinos can guarantee who is playing and at what location. But everything from Global Positioning Systems to advanced Internet address tracking systems to a mouse that reads thumb prints are being tested. 

"The technology is already there. It's a question of cost and implementation," Cabot said. Even so, other hurdles persist. 

While at least one Louisiana federal judge has cast doubt on the validity of the 1961 Wire Act to ban Internet wagering, lawmakers are moving quickly to attack online wagering by banning credit card companies and other payment systems from transmitting money to the online gaming operators. Such a law is being considered by the California state legislature, which also seeks to set a $25 fine for online gamblers in the state. 

Already, several credit card companies have changed their practices as online wagering has mushroomed -- and after finding it difficult to collect charged gambling debts. Most no longer "credit" players' winnings back to their credit cards, so players now must wait for the gambling site to send a check. 

Fred Marino, a 47-year-old Silicon Valley businessman who ran up more than $50,000 in online gambling debts on several credit cards, got hooked after finding links to online casinos in pop-up ads as he surfed the Internet. 

His losses "just snowballed," he said. "It's too easy." 

When the credit card bills kept coming, he turned to Ira Rothken, a Marin County attorney who specializes in cutting-edge Internet cases. Rothken argued in Marin County Superior Court that California law has forbidden gambling loans since the Gold Rush era. Discover Card recently settled by relieving Marino of $700 in debt and agreeing to ban its California cardholders from doing business with online casinos for at least three years. 

As legislatures around the country grapple with government's role, the gaming industry is beginning its campaign to legitimize online wagering. It argues that not only is it losing out to overseas competition, but that Americans would enjoy much stronger consumer protections under state regulations. Still others argue Internet restrictions are only made to be broken. 

"People get overwhelmed by technology," said gambling expert Rose. "In fact, the law can handle it. There are ways to regulate it." 

-----To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.sjmercury.com 

(c) 2001, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. HET, MGG,