Premiership football club Aston Villa has tied up a potentially controversial shirt sponsorship deal with 32Red, a Gibraltar-based internet gaming company that is quoted on the London Stock Exchange's junior market, AIM.

Its decision comes just a day after Manchester United struck a record-breaking sponsorship agreement with American insurance group AIG, having turned down a higher offer from Mansion, a gambling and casino operator also based in Gibraltar.

Although Mansion claimed it was prepared to pay more to sponsor the United kit, about £65 million in total, the club is understood to have had reservations about developing such a close association with a gaming group.

The sensitivities about football and gambling are rarely far below the surface. The sport has been scandalised in recent times by allegations of large betting rings in the Far East exercising influence on the outcome of games.

Already this season, one Premiership referee, Mike Dean, has been suspended for having a relationship with an online gambling site (although it was never suggested that he tried to influence the outcome of matches), while last year a referee in Germany was suspended after being involved in a match-fixing ring.

In the case of the Aston Villa deal, the name of 32Red, which has a market value of more than £75 million and runs an online poker room as well as a casino, will feature on the front of the club's playing strip for "at least" two years as from the start of next season.

The sponsorship deal is understood to be worth just shy of £1 million a year to Aston Villa, although revenue sharing agreements struck as part of the arrangement should take it above that amount. 32Red replaces DWS investments, who were signed last year shortly after the financial collapse of the club's previous shirt sponsors, MG Rover.

32Red will also become the club's official online gaming partner.

Stuart Ryan, Aston Villa's sales director, said the club had held talks with "a number of companies" interested in sponsoring the players' shirts but in the end, he said, "this is the best deal for the club".

"32Red is a modern, pro-active company at the forefront of its sector and we're looking forward to working with them as commercial partners rather than merely sponsors," Mr Ryan said.

Although Aston Villa declined to confirm the exact value of the sponsorship deal, Mr Ryan said initial seasonal payments and the revenue sharing agreement "means the overall package could be worth a healthy seven figure sum per season to the club".

A spokesman for Villa, currently 16th in the Barclays Premiership, played down any comparisons between the 32Red deal and Mansion and said the club "have thought about this and are comfortable" with the assocation.

Ed Ware, the chief executive of 32Red, said the partnership fits into the company's strategic marketing plans "extremely well".

"Our presence at targeted sporting events including Premiership and Championship football matches and horse racing meetings has worked well for us to date. This deal will sit very well alongside those activities, as well as our existing online marketing programmes," he said.

A spokesman for 32Red dismissed any suggestion that an association between a gaming firm and a football club was controversial and pointed out that 888.com has been a long-term sponsor of Middlesborough.

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