The USA is the main market for gaming firms, and the recent arrest of BetonSports boss David Carruthers, on charges of illegally taking bets from US citizens, has cast a shadow over the long term viability of the industry, with nervous investors, causing share prices to tumble.

Mr Mummery believes the jurisidictions with strong regulations, good reputations and attractive tax packages will become stronger then ever.

He said: 'Recent events in the US can only have and will only have a positive impact for the Isle of Man, because it demonstrates very very clearly, that the quality businesses, who wish to be in this industry long term absolutely have to put themselves in a premium, well-regulated jurisdiction like the Isle of Man.'

The department of trade and industry has made e-gaming a central plank in its strategy to diversify the Manx economy. It believes the business model is ideal, as it uses low levels of labour, but generates large tax revenues for Treasury and provides highly skilled jobs for the Island workforce.

It is competing directly with places like Gibraltar, Alderney and Malta for business.

Gibraltar is a direct competitor to the Island and already hosts the world's biggest online gaming company PartyGaming, which floated on the London Stock Exchange in June last year with a value of £4.6bn.

Gibraltar's Betting and Gaming Association has referred to its island as 'the most important jurisdiction in the world,' but Mr Mummery isn't convinced.

He said: 'Gibraltar is going through a period of flux due to changes in the taxation regime announced by their Chief Minister which have been agreed with the EU and are to be phased in by 2009.

'It has a different model to the Isle of Man, as, historically, a lot of gaming companies have been 'headquartered' there, but much of the telecommunications and technology is located in other jurisdictions.

'Apart from the loss of revenues from the telco and hosting activities, this doesn't give the same level of regulatory control.

'Also, unlike the Isle of Man, they have used e-gaming to soak up unemployment from call centre activities, which is not an appropriate model for us.'

He added: 'That said, Gibraltar is a credible jurisdiction, that will continue to be attractive to some players in the industry, but I don't see much room for growth and it will be interesting to see how they address required changes to their taxation regime over the next two to three years.'

As for Malta and Alderney, Mr Mummery says the outcome of the UK white list could be crucial. The UK's Gambling Act 2005, implemented next year, will ban companies based outside the EU from marketing into Britain. The Isle of Man, which is outside the EU, will hopefully be added to a white list, that excludes them from this ban.

Mr Mummery said: 'In this part of the globe, the focus is on three jurisidictions. The Isle of Man, Alderney and Malta. The whole industry believes there will two territories on that list, Alderney and the Isle of Man as Malta is already in the EU.'