Antigua, which won a WTO ruling last year against the U.S. restrictions, is asking the trade body for authorization to target American trademarks and copyrights if the U.S. refuses to alter its legislation.
It said the sanctions would come into effect "shortly," unless the United States requests a WTO arbitration panel on the level and scope of the sanctions.
"While we realize this is a significant step for Antigua and Barbuda to take, we feel we have no other choice in the matter," Antigua's Finance Minister L. Errol Cort said in a statement.
"Until such time as the United States is willing to work with us on achieving a reasonable solution to this trade dispute, we will continue to use every legitimate remedy available to protect the interests of our citizens," he said.
U.S. trade officials were not immediately available for comment.
The move by Antigua comes a day after the European Union told the United States it, too, wanted compensation for the U.S. ban on foreign online gambling sites, saying it does not comply with global trade rules.
British online gaming operators such as Sportingbet PLC and Leisure & Gaming PLC were forced to quit the profitable U.S. market last year when Washington stopped U.S. banks and credit card
companies from processing payments to online gambling businesses outside the country.
The decision closed off the most lucrative region in a market worth $15.5 billion last year. About half of the world's online gamblers are based in the United States.
But an EU official said the concessions Europe was looking for would likely be "commitments" to open up other trade sectors, meaning gambling sites would not win their way back into U.S. pockets.
"We need new concessions that would be equal with the benefits lost," he said, speaking on condition of anonymity because he is not authorized to be quoted by name in media reports.
Antigua argues that before the U.S. ban was introduced, online gambling provided income for hundreds of its citizens and helped end its reliance on tourism, which was hurt by a series of hurricanes in the late 1990s.
The World Trade Organization ruled in December that the law unfairly targeted offshore casinos, telling the U.S. it could keep restrictions against sport betting in place if they were also applied to American businesses.
After losing the case, the U.S. announced that it would take an unprecedented legal step to change the international commitments it made as part of a 1994 treaty regulating the trade in services among the 150 members of the WTO. As a result, the U.S. declined to challenge the WTO ruling, claiming its legal maneuver effectively ends the case.
Rep. Barney Frank, D-Mass., who chairs the congressional committee that oversees financial services, introduced a bill in April that would reverse the Unlawful Internet Gambling Enforcement Act — but his plan faces long odds in Congress, and likely opposition from the Bush administration.