As famous names and established companies get involved, opposition to Internet gambling is appearing to crumble.

It's illegal for Americans to offer gambling over the Internet, right? That's why the industry is hidden in Caribbean shadows, right? Tell it to Kenny Rogers.

The singer who immortalized "The Gambler" is not, his associates say, much of a gambler himself. But in mid-1998, he authorized the construction and operation of Kenny Rogers Casino on the Internet (www.kennyrogerscasino.com), where Web surfers with credit cards can hold 'em and fold 'em until they walk away (or run).

It's true that, in keeping with most people's perceptions of Web gambling, Kenny's virtual casino is not physically located in the United States. It resides a few dozen miles off the coast of Venezuela, in the Netherlands Antilles. The outfit that handles its cybercash transactions is in Toronto. And Kenny's site maintains a squeaky-clean distinction that many similar sites do not: A disclaimer in tiny type on several pages reads, "This site does not allow for gambling for money by persons within the United States." Unless you have a credit card registered with a non-U.S. address, a U.S. citizen can't trick the casino into letting him or her gamble, except in a free "practice" area.

But for all that fastidiousness, Kenny Rogers Casino is essentially controlled by a company in the United States. Not only can you walk right into its San Diego headquarters, you can buy its stock on the Nasdaq. Yes, the casino's license is held by a firm called Bardenac, but the substantial duties of operating the site – building it, advertising it, maintaining customer service – fall to a consulting company called Worldwide Media Holdings, which receives a percentage of all casino profits. WMH is a wholly owned subsidiary of Inland Entertainment, a San Diego-based company that trades under the ticker symbol INLD.

Inland was initially founded in the 1980s as a consultant to the Barona tribe of Mission Indians, which operates a casino on a reservation near San Diego. A few years ago, the Barona tribe decided to bring in Kenny Rogers as a spokesman. "It was very successful, in the sense that Indian gambling was still going through a lot of political challenges," says Fritz Opel, Inland's chief of online gaming. California's governor – and much of the local business community – opposed the Barona casino, and Rogers' involvement was a political turning point.

"People said, How can it be so bad if Kenny Rogers likes it?'" recalls Opel. As Internet gambling became a technological reality, Opel says he "saw some parallels" to the Indians' situation, and reached out to Rogers again. "He's been very helpful in creating credibility. It's important with our players to know they're dealing with a legitimate business." Rogers and Inland are not alone. Increasingly, the world of "legitimate" business is throwing its weight behind online gambling.

Online horse racing has been an especially active area of late. In early 1999, a Los Angeles-based firm called Youbet.com started Webcasting live races over the Web from 18 tracks across the country and offering surfers the ability to wager over the Internet. It is perfectly legal in 40 states and the District of Columbia to place a bet on Youbet.com. In late February, the New York Racing Association approved online Webcasts on its own site (www.nyra.com) of horse races in the state (although bettors, for now, will still have to call an 800 number). This summer, TCI and News Corp. plan to launch the Television Games Network, which will feature four to six races per hour packaged into a live, hosted television program, with access to a full menu of wagering opportunities from tracks across the country.

The explosion of online betting isn't limited to the ponies. In March, a site called Bingohour.com went live. It enables players to buy virtual bingo cards for $1 and win jackpots as large as $100,000.

Playboy has announced that it will offer a line of casino-style games on its Internet site that, like those on Kennyrogerscasino.com, U.S. citizens can play only for fun. But Playboy.com will also link to offshore gambling sites that play for real money. With such upstanding media corporations dipping their toes into the pool of online gaming, some in the Internet industry are betting that the day when a "legitimate" online casino opens in the United States is not far behind.

The potential action is too compelling for even the largest tech tycoons to resist. One of Microsoft (MSFT) 's less-publicized adventures is Ninemsn, an Australia-based Internet service to which Bill Gates has pledged tens of millions of dollars. His equal partner is Australian tycoon Kerry Packer of the Crown Casino in Victoria. Packer is a man with a voracious gambling appetite.

That partnership leads many observers to believe that an online casino – using Microsoft platforms, of course – is in the works. A Ninemsn spokesperson says that the site does not now offer online gambling and would not comment on future plans. Tony Cabot, an attorney specializing in gaming issues, says flatly, "When you see Kerry Packer get together with Microsoft, you have to believe there is a future for this type of wagering."

You might think that the prospect of competing against the likes of Microsoft would terrify a $20 million company like Inland. But they say the more bettors, the better. Says Opel, "Bringing in the big names and established companies only adds credibility and visibility to what we're already doing."

A few hurdles have to be cleared before such ventures can take off – beginning with the federal government. The Justice Department doesn't think that online casinos (including those that offer gambling on sports events) can legally conduct business in the United States, even if they are based in places where gambling is legal. In a highly publicized March 1998 "raid," Mary Jo White, the U.S. attorney for the Southern District of New York, indicted 14 managers of six Internet companies for offering gambling on their sites. The defendants, many of whom live abroad, were threatened with up to five years in prison and $250,000 fines.