Mark Blandford, whose Netbet service is based in Alderney in the Channel Islands, is starting up a sports book with prices on events in Britain and around the world.

He has his eyes set on some of the estimated 200m people who are expected to be using the Internet by the year 2000.

Market could reach $2.86bn

Data Monitor estimates the Internet gaming market could reach $2.86bn (�1.74bn) in annual turnover by the turn of the century.

Alderney has granted three electronic betting licences - the first of their kind - to operators on the island in return for a "significant" licence fee.

Netbet will be the first to hit the Web and will offer betting on a wide range of world sports.

Mr Blandford, who used to run a string of betting shops in the Midlands, says punters will get an e-mail as proof of their bet and he says a �200 minimum deposit is designed to deter under 18s.

He expects 99% of his custom to come from outside the UK and says British residents will be the only ones who will have to pay tax on their bets.

Around 150 firms, including some of the major casinos in Las Vegas, have been running Internet gambling sites for several months.

Internet casinos may be able to avoid tax

Most are reputable corporations but there are an increasing number of "sharks" involved.

Internet gaming is not controlled by any government and in the US there has been a rise in the number of people claiming they have been "ripped off".

Simon Platts, a student from Sheffield who designed the Casino UK site, says: "Friends who have tried it tell me gambling by computer is not much fun.

"When you go to a casino you feel you have a chance when the croupier is a human being but a computer has an unbeatable memory and knows every card you pick up."

Earlier this month Starnet Communications, an American company described as the "pioneers of Internet gaming", forged deals with three Florida greyhound tracks to provide the world's first live coverage of dog races on the Internet.

Viewers outside of North America can place bets on the races using a secure online financial transaction system.

World Gaming Services Inc, a wholly owned subsidiary of Starnet based on the Caribbean island of Antigua, accepts and processes the cyber-wagers.

Virtual bingo and blackjack

In addition to webcasts on international dog and horse races, the multilingual system features virtual casino games, a book with a live odds feed from Las Vegas, a virtual bingo hall and an international lottery ticket brokerage.

A Starnet spokesman says: "We have the leading-edge technology and exceptional talent to identify online services that are user-friendly, secure and an outstanding multimedia experience."

One of Britain's biggest bookmaking firms, William Hill, already has a website which offers tax-free betting to non-UK residents.

William Hill spokesman, Graham Sharpe, says he is not worried about competition from abroad.

'Tax-free betting is an incentive'

He says: "The majority of punters have access to any number of dog and horse races in this country and part of the appeal of betting is knowing the runners and riders."

Mr Sharpe says: "Betting tax-free may be an incentive for some people but part of the excitement is the event itself and streaming a race live on the Internet is costing you money anyway."

The South African-based Gaming Club is one of 65 online casinos listed on Yahoo

He says Internet gamblers are taking an added risk.

"If you win over here and the bookie won't pay out you can do something about it but if he is on the other side of the world there is no amount of complaining which will get your money back."

William Hill is considering introducing betting for UK residents - with the tax paid - but believes the demand is not there yet.

Lack of regulation

Dr Mark Griffiths, chairman of the National Committee on Compulsive Gambling, says the lack of regulation on the Internet makes it a huge problem area.

"For example, how can you be sure adolescents are not using their credit cards to gamble ?" he says.

Dr Griffiths says: "The Internet could make a big shift in the way we gamble because it is so accessible. There is nothing to stop me sitting in my office and gambling all afternoon."

He says: "At the moment the technology is not sophisticated enough and a game of virtual poker, for example, can take a long time.

"But as the designers iron out those problems I can see hardened gambling on the Net becoming a real problem."