Aston Villa's lucrative sponsorship deal with an online casino could be outlawed after the Government ordered an inquiry into the encouragement of under-age gambling.

Ministers have ordered the Gambling Commission, the official watchdog, to look into the seven-figure agreement, amid concerns it could pursuade people to bet.

Gibraltar-based gambling firm 32Red became Aston Villa's official shirt sponsor in April. The two-year deal involves the casino making two six-figure payments and sharing revenue from its online services with the football club.

It is believed to be worth around #1 million in total and was described by Aston Villa's Sales Director Stuart Ryan as "an exciting and potentially lucrative opportunity".

Blackburn, Middlesbrough and Tottenham football clubs have also signed shirt sponsorship deals with rival internet casinos.

But Culture, Media and Sport Minister Richard Caborn revealed in the House of Commons that he had ordered an inquiry into the arrangements.

He said: "There are concerns about advertising on football shirts and sponsorship of football clubs by gambling companies.

"The Gambling Commission will consult on the issue early in the new year, with my full support. As the Minister for Sport as well as the Minister with responsibility for gambling, I think that we need to take a responsible attitude to that."

It followed complaints from MPs that the sponsorship was bypassing laws designed to prevent children seeing adverts for gambling. But MPs are also concerned about the impact online gambling can have on adults.

Labour MP Ben Chapman (Wirral South), speaking earlier in the same debate, said: "There is a particular worry about football. For example, I understand that one company has sponsored Aston Villa.

"Companies are out to maximise profits, and a big part of that is attracting new customers – from competitors, but also from those who have never gambled."

The inquiry will be a major test for the Gambling Commission, a new body which this year replaced the Gaming Board for Great Britain as the official regulator. It is based in Birmingham and employs 200 at its city centre offices in Victoria Square.

An Aston Villa spokeswoman said: "The arrangement we have is legal and complies with all regulations. If the Gambling Commission wish to examine it we will of course be happy to co-operate with them."

Doctors expressed concern at the growth of internet gambling at the British Medical Association's annual conference, after it emerged four million people now play each month.

The US Congress passed laws effectively banning internet gambling in October, but British Ministers have held a series of meetings with operators and are encouraging overseas firms to register in the UK or Gibraltar.

The Premier League is believed to be lobbying Ministers privately on behalf of member clubs.

It is pushing for a compromise to avoid a total ban on shirt sponsorship, such as removing the name of casinos from replica shirts aimed at youngsters under 16.

A spokesman for 32Red said: "We will monitor and evaluate the situation as it unfolds, but today it is business as usual."

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