Palau's President Johnson Toribiong has vetoed the casino bill, describing it as a get-rich-quick scheme that will not benefit Palau.
In a letter to the national legislature, the president says the controversial bill was a rushed, confusing and not well-thought out piece of legislation.
The bill stated that controlled gaming in Palau will diversify its tourism base and attract new investments.
But President Toribiong says he believes gambling will not augment the tourist industry, but rather will detract from the very reason that people choose to vacation in Palau.
Proponents say the bill contains provisions to protect the people of Palau from the dangers of compulsive and addictive gambling, but the President's noted that it does not prohibit Palauans from gambling.
He says the bill appears to favour casino operators rather than the people of Palau.