Last Wednesday, the tiny Caribbean nation of Antigua and Barbuda (Antigua) succeeded where organized crime has long failed: the World Trade Organization, based in Geneva, Switzerland, declared American federal and state prohibitions on remote-access gambling activities unlawful.

Antigua argued that American laws prohibiting Internet gambling were putting thousands of Antiguans out of work while protecting the American gaming industry from international competition. The WTO agreed.

The 287-page decision repeatedly asserts that the WTO was intended to interpret broadly its authority to review “measures …affecting trade in services,” and gambling is defined as a service. Under the scope of the WTO review, much of American federal and state law could “affect” trade in services, and we could see WTO rulings in areas from drug imports to prostitution.

Governments and businesses around the world disaffected by American laws, or simply disaffected with America, will now be emboldened to appeal to the WTO to review American laws, particularly those related to Internet transactions. The mischief will not soon end.

Disturbed by the WTO decision, the Bush administration promises an appeal. If the WTO interprets its authority broadly – particularly with respect to the Internet – as a means to regulate American business, something more than an appeal may be in order.

The WTO serves a useful role in prohibiting member countries, including America, from unreasonably discriminating in favor of domestic firms and transactions at the expense of international competition. But last week’s WTO decision is the first directly to address Internet services. Further, for the first time, it tries to open the American market to transactions that are illegal for domestic businesses.

Internet gambling in America is illegal whether it originates in Florida or Antigua. The WTO seems unconcerned, and gambling is just the tip of their jurisdictional iceberg.

Americans cannot lawfully use the Internet or any other means to order cocaine from Colombia or prostitution from the Netherlands.

Even such seemingly innocuous direct consumer transactions as cotton baby pajamas from Britain (violating federal consumer product safety laws), pharmaceuticals from Canada (federal drug laws), toilets from Mexico (federal water usage regulations), or software from Japan (intellectual property licensing) may violate one or more federal or state laws, unrelated to whether the transaction is conducted over the Internet.

In most states, medical services cannot be offered or prescribed over the Internet. Internet transactions in wines and spirits are heavily regulated if permitted at all.

Thanks to last week’s ruling, these and other regulated or proscribed transactions may at least be subject to WTO review.

If America has not explicitly claimed an exemption from these transactions, or if we do not have binding treaty obligations with respect to them, the WTO feels little compunction to opine on federal and state rules that were never designed with international trade in mind.

One may reasonably wonder whether some or all of these federal and state rules make sense. Our understanding of the sensibility of a government rule is not enhanced if the arbiter of the rule is unaccountable to any portion of the American public.

Our government is restricted by the constitution in its own powers to regulate, but the WTO seems disposed to believe that America delegated to it the seemingly unbounded power to review any and all American laws and regulations so long as they “affect” international trade.

Ironically, a legal foundation for last Wednesday’s WTO jurisdiction may have inadvertently been written just one day earlier by the Federal Communications Commission. The FCC found that Vonage’s Voice Over Internet Protocol (VOIP) telephone service is not intrastate in nature but interstate and ultimately international in nature.

Many federal regulators find state laws and regulations quaintly anachronistic in the Internet age.

As it turns out, the WTO may find our federal regulations equally anachronistic. With an international Internet, the strength and threat of WTO regulation can only grow.

The Internet expands opportunities for businesses and consumers alike. International firms should not be disadvantaged in American markets. But nor should they be given a privileged position of operating above and beyond the reach of legitimate American laws. We must find a way to return the WTO to that proper balance.

Mr. Furchtgott-Roth is a former commissioner of the Federal Communications Commission. He can be reached at hfr@furchtgott-roth.com.