Is it legal for an on-line merchant to send money to a gambling web site? if not can i deny payment

That depends upon many factors. Where is the gambling site hosted and located? What type of gambling activity is hosted upon the site? What type of business are you involved in? For what purpose would you be sending money to the gambling site? In general, it is not legal under United States law to place or accept bets on internet gambling sites. This applies most clearly to sports betting. Some have made arguments that poker is excluded under Federal Laws, although that interpretation has yet to gain acceptance in the courts.