The debate has resurfaced in recent months as regulators work on rules that would allow gamblers in Nevada and other states to deposit money in Internet-based accounts to bet on horse and dog races from their home computers.

The rules on so-called "account wagering" would expand on services that already allow Nevada residents to bet on sporting events from home.

Since 2001, Station Casinos Inc. has offered a service called Sports Net Connection that requires bettors to show up at a company casino and show a Nevada ID before establishing a computer account. The account, which has five layers of player verification built into the system, allows gamblers to wager on all kinds of sports including horse and dog racing but is offered over a closed-loop system or "virtual private network" rather than the Web.

Gamblers also can make telephone bets but have to carry beepers so casinos can determine their locations. The service isn't available for out-of-state gamblers. Coast Casinos Inc. and The Mirage resort also offered similar services a few years ago but have since discontinued them.

More rules are needed to regulate customer traffic because the new remote betting accounts would cross state lines.

Nevada sports books say they stand to cash in on the new rules in spite of the fact that account wagering over the Internet is already allowed in many states. That's because they have powerful name brands and customer databases that would be able to draw in gamblers from other states, they say. A California gambler who comes to Caesars Palace to wager on the Kentucky Derby can already place a legal bet on the Derby from his home state but might rather place a bet from home through a well-known brand like Caesars, for example, experts say.

While Nevada regulators are months away from a first draft on account wagering, they already have made up their minds on a key feature of the service to the dismay of casinos and software companies that were hoping for an Internet gambling goldmine.

Unlike several other states already offering account wagering, Nevada regulators say they won't allow gamblers to actually place their bets on the Web. Instead, bettors will place bets over the phone or use closed-loop computer systems.

Regulators say keeping bets off the Internet can help casinos determine the identity and location of gamblers.

"We feel (the Internet) is still not a secure medium for communication," Gaming Control Board Chairman Dennis Neilander said. "There may be a point when use of the Internet is appropriate, but this is the starting point."

Gamblers would be able to use the Internet to establish an account, check race results and perform other functions besides placing bets, he said.

Vic Gallo hopes that will change.

Gallo is the head attorney for Youbet.com, a California company and the largest account wagering hub nationwide. The publicly traded company, founded in 1995, takes bets in 39 states largely over the Internet.

Youbet.com last month transferred Gallo, former corporate counsel for slot maker Konami Gaming Inc. of Las Vegas, from its Woodland Hills headquarters to Las Vegas to set up shop as general manager of the company's upcoming operations in Nevada and establish more contacts with casinos and regulators. The company is one of several account wagering software firms that are eyeing business in Nevada.

Casinos may choose to partner with companies such as Youbet.com rather than develop their own account wagering systems from scratch, experts say.

Technology can now pinpoint players' identities and locations with a good degree of accuracy, Gallo said. He has tried to persuade Nevada regulators that the Internet is safe but so far isn't optimistic that they will change course, he said.

"How do you know the guy in the Hard Rock casino is 21? If I can give you a technology with that confidence level, why would you not allow it?" Gallo said.

Without Internet betting, Nevada will be at a competitive disadvantage relative to other states that offer account wagering, he said.

Using closed-loop systems to link gamblers in other states with Nevada casinos could be too costly and cumbersome, said Tony Fontaine, a consultant for Nevada race books and a former technology executive for Station Casinos. Telephone betting might not make much financial sense and could also be difficult because it could require outfitting phones with satellite technology, he said.

The Oregon Racing Commission processes about $870 million a year in bets largely over the Internet while the New York Racing Association, which allows telephone bets but not Internet bets, processes only about $20 million in wagers a year, Fontaine said.

That Nevada's system would be stricter than other states' with regard to Internet gambling isn't a surprise, observers say.

Regulators last year scrapped plans to develop rules that could have allowed Nevada residents to place casino bets over the Internet, saying existing technology wasn't sufficient to determine whether bettors were of age or located in legal gambling states. Regulators say they also are taking their cue from the Justice Department, which sent Nevada officials a letter stating that Internet wagering across state lines is illegal.

"The word 'Internet' is a dangerous word in a regulated jurisdiction," said John Sullivan, vice president and general counsel for Las Vegas Dissemination Co., the electronic betting hub that feeds off-track betting information to Nevada casinos.

The law enabling account wagering has allowed states to accept Internet bets without violating existing federal law, said Tony Cabot, a Las Vegas attorney for the Nevada Pari-Mutuel Association. While no federal law specifically forbids Internet gambling, the Justice Department has interpreted a federal law known as the Wire Act, which prohibits telephone betting over state lines, to also apply to Internet gambling.

Even if Nevada doesn't allow Internet wagering on races, casinos are hoping for a boost in race revenue with account wagering. The new rules will allow residents in other states where account wagering is legal to gamble through Nevada race books for the first time. It's likely they'll have to place wagers by telephone or a closed-loop system rather than the Internet.

Johnny Avello, director of race and sports for Caesars Entertainment Inc.'s Bally's and Paris resorts, said the changes could significantly boost the company's race revenue.

"I'm excited," Avello said. "We just want to get on a level playing field with everyone else."

The service would also help draw a new generation to the sport that is already familiar with the Internet, Avello said.

"People see racing as something for old people. I don't see it that way. I see a lot of younger people participating in it," he said.

Sullivan estimates that pari-mutuel wagering in Nevada casinos -- which primarily includes horse and dog races -- will increase by as much as 35 percent with account wagering.

After losing ground to other casino games in the 1990s, race book revenue -- always a minor percentage of casino wagers -- has plateaued over the past few years.

Last year, Nevada's casino race books won about $87.2 million from gamblers -- an increase of less than 1 percent from the prior year. That compares with $6.5 billion won from slot machines (up 3 percent from 2002) and $9.6 billion from casino games overall (a 2 percent jump).

As a partial solution, Nevada lawmakers passed legislation last year enabling regulators to draft rules for account wagering. The legislation was backed by the Nevada Pari-Mutuel Association, a group of about 76 casinos with race books.

The association has pushed for Internet betting as a convenience for gamblers, saying the Web would attract people who now gamble in illegal online casinos.

The business potential of the Internet is "limitless," Sullivan said.

Account wagering companies such as Youbet.com don't have the marketing muscle of Las Vegas casinos, which could use their advertising budgets and customer databases to lure customers to the Web sites, he said.

Account wagering is now available in a dozen states, with New Jersey soon to follow. The service has been around for at least a decade but exploded after 2000 when Congress passed a little-publicized amendment to the federal Interstate Horseracing Act over the objections of the Justice Department. The amendment, which clarified existing off-track betting rules, allows gamblers to place bets on pari-mutuel races from other states "via telephone or other electronic media."