The U.S. ban on offshore Internet gambling payments is illegal, the World Trade Organization said yesterday, upholding a previous decision that allowed for possible sanctions.

Shares of online gambling sites including PartyGaming PLC rose after the WTO said the United States ignored its previous ruling that challenged the U.S. ban on payments to gaming Web sites while allowing bets on its own soil.

Antigua and Barbuda, a Caribbean nation of 80,000 people, has challenged Bush administration efforts to close the estimated $12-billion global business to U.S. residents, who account for half of the market. The United States banned credit-card companies from processing payments to betting sites such as SportingBet PLC and Empire Online Ltd., which then ceased U.S. operations or sold them for nominal amounts.

Yesterday’s ruling “vindicates all that we have been saying for years about the discriminatory trade practices of the United States,” Antiguan Finance Minister Errol Cort said in an e-mailed statement.

Antigua, the smallest government to lodge a WTO complaint, scored an initial victory against U.S. online gambling restrictions when the WTO found in April 2005 that the United States had pledged to open the industry to competition 10 years earlier. Yesterday’s ruling rejects a U.S. appeal against that.

The United States agreed that the ruling finds it failed to comply with the two-year-old decision.

Still, the United States says the report allows it to maintain a ban on Internet gambling to “protect public order and public morals” as long as it doesn’t discriminate against foreign companies, Gretchen Hamel, a spokeswoman for the U.S. Trade Representative’s office in Washington, said in an e-mailed statement.

“We are currently reviewing our options,” Hamel said.

Gary Kaplan, a fugitive and founder of British Internet sports book Betonsports PLC, was arrested Wednesday in the Dominican Republic and transferred to U.S. authorities, federal prosecutors said yesterday in a statement.

Kaplan, 48, was indicted by a U.S. grand jury last June along with his company and 10 individuals for racketeering and conspiracy related to illegal Internet gambling. He was caught at a hotel in Santo Domingo following a “worldwide search,” St. Louis U.S. Attorney Catherine Hanaway said in a statement.

BetOnSports chief executive officer David Carruthers remains under house arrest in a suburb of St. Louis. He was arrested in July, shortly after Hanaway unsealed the criminal indictment against the London-based company, which is publicly traded.

The case has been closely watched by the online gambling industry, which generates about $6 billion annually in the United States.

The indictment charges Carruthers and Kaplan with felony racketeering and fraud. The charges are filed using a 1960s-era law known as the Wire Act that prohibits placing bets on sports events over the phone.

Originally designed to crack down on mobsters, the law has become a tool for U.S. prosecutors to charge offshore Internet gambling operations.

In the WTO case, the United States has argued that the prohibitions predating the October law apply to both foreign and American betting services, and the WTO’s decision only applies to gambling on horseracing, which is allowed to discriminate against foreign companies.

The United States “had an opportunity to remove the ambiguity” between legalized betting on horseracing across state borders and bans on other forms of gambling, the WTO judges wrote in yesterday’s 41-page decision. “Instead, rather than take that opportunity, the United States enacted legislation that confirmed that the ambiguity at the heart of this dispute remains,” the report concludes.

The United States says that its latest law isn’t covered by the WTO ruling and said that its 1995 commitment to open gambling to foreign companies was an oversight by the Clinton administration.

Analysts questioned whether the United States would allow online gambling based on yesterday’s ruling.

“I have no idea at this stage what measures they could put in place to force America’s hand,” said Julian Easthope, an analyst of online gaming stocks at UBS AG in London.

Antigua may seek sanctions in the form of withdrawing intellectual property protection for U.S. trademarks or copyright. Known as “cross-retaliation,” such sanctions are legal at the WTO when an economy can’t afford to impose sanctions in the form of higher customs duties on goods.

“We’re really hoping that as their options run out and the U.S. sees that they can’t delay any more, they’ll enter into negotiations with us,” Mark Mendel, chief legal counsel to Antigua said in a telephone interview from the Caribbean.

“The writing is on the wall, and anyone who takes the time to read the report will realize it’s not true” that the ban can be justified on moral grounds, he said.