A woman's lawsuit to recover $70,000 she lost gambling on-line has prompted MasterCard International to publish payment guidelines for Internet casinos.

The rules, which MasterCard said would take effect "over the next several months," would require Internet gambling sites with MasterCard merchant accounts to post notices stating that on-line gaming is illegal in some jurisdictions and that customers can be held responsible for any bets they place.

Internet casino operators also will be required to ask customers which state or country they live in and to keep a record of all responses.

Under the rules, when a customer uses a MasterCard with such a merchant, the card issuer will be notified through special coding that the incoming transaction is from an on-line gambling site, MasterCard said.

Visa International came out with Internet gambling regulations in June 1998, which took effect immediately for new merchants and about six months later for existing merchants. Visa requires member banks to verify that the gambling site has a valid license to operate "under the local law for its country of domicile," a Visa spokeswoman said.

The site also must clearly post its rules of play and payout policies and must "use its best efforts to prohibit minors from gambling," Visa said.

These rules apparently did not forestall the gambling of Cynthia J. Haines of Marin County, Calif., who sued MasterCard, Visa International, Visa U.S.A., and Providian Financial Corp. after racking up $70,000 in debts charged to her credit cards.

Her suit, filed Aug. 11, 1998, in Marin County Superior Court, claimed that because Internet gambling is illegal in California the companies acted wrongly in letting her use her credit cards, thus relieving her of the liability to repay.

MasterCard's rules were written as the company's settlement agreement with Ms. Haines. MasterCard is the only defendant to reach a settlement; the agreement is awaiting court approval.

MasterCard established the guidelines "to make sure that our partners in the payment system are aware of the potential that there could be legal ramifications" with on-line gambling charges, said association spokesman Edward Dixon.

San Francisco-based Providian said it is still pursuing its claim to get Ms. Haines to pay off the portion of debt she ran up on its card.

Card companies and bank regulators are working to resolve the challenging legal issues raised by on-line casinos. Most are in Caribbean nations where gambling is legal.

"One of the major issues on the Internet has been jurisdiction," said David B. Lipkin, counsel at Drinker, Biddle & Reath in Philadelphia. "Should a payment-system vehicle that is created for lawful activity be allowed for activity which may be illegal in a jurisdiction under state law?"

Noah Hanft, senior vice president and U.S. counsel for MasterCard, said "appropriate information and notice" must be given to cardholders, merchants, and card issuers "so that all parties can make informed decisions as far as their role in the transaction."

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