Antigua and Barbuda wants sanctions worth $3.4bn (£1.7bn) imposed on the US for its failure to obey a World Trade Organization (WTO) gambling ruling.
Antigua says online betting has helped it rely less on tourism
The Caribbean nation said the US move to stop its banks and credit card firms from allowing payments for gambling sites outside the US was illegal.
The WTO earlier ruled that the US could only block gambling sites if it also blocked US horse-betting websites.
The US has said it is finding a way to respond to Antigua's claim.
Antigua has said online betting is a key part of the economy and has helped reduce a dependence on tourism.
When the US enforced the ban on foreign gambling sites last year, it effectively removed online betting from trade agreements.
"While we realise this is a significant step for Antigua and Barbuda to take, we feel we have no choice in the matter," said Antigua's finance minister L Errol Cort.
Antigua said unless the US was willing to work towards a "reasonable solution", it would continue to use "every legitimate remedy available to protect the interests of our citizens".
The island now wants the WTO to give it permission to let it ignore US trademark and copyright laws in retaliation.
Meanwhile, Japan and India have submitted requests to the WTO for compensation, arguing that if the US blocks business with partners in one sector, it should compensate them by opening up other areas.