The company that administers the world's largest internet casino — Golden Palace.com — has pleaded guilty in Quebec to charges of illegal gambling, in a case that raises questions about First Nations' right to hand out gaming licences.

Cyber World Group, which administers the online casino through a server located on the Kahnawake Mohawk reserve, pleaded guilty to the two charges in September and must pay a $2 million fine, the CBC's French language service, Radio-Canada, has learned.

The charges laid against the virtual casino are the first ever in Quebec, and raise questions about the Mohawk reserve's authority to hand out gaming licences.

The online casino industry is flourishing in Kahnawake, where hundreds of betting sites are hosted on servers managed by the Mohawk Internet Technologie (MIT), a business created by the community's band council.

About 60 per cent of the world's online gambling traffic runs through servers in Kahnawake.

But according the Criminal Code, only the provincial government is authorized to hand out gaming licences, which prompted Quebec police to raid the Montreal-area offices of Golden Palace.com more than a year ago as part of its investigation.

The Mohawk community has long argued that it has the right to provide space on its servers to house online casinos, under section 35 of Canada's Constitution, which protects traditional native rights.

Kahnawake's 'jurisdiction is unquestioned' internationally: band

The Mohawk Gaming Commission has already handed out 443 permits without any problems, said Joe Delaronde, a member of the Kahnawake band council.

These charges and fines are part of a wider jurisdictional battle between the Mohawk community and the provincial and federal governments, he explained to CBC News.

"We don't ask for anything," he said on Wednesday. "We tell them that this is our right to do this. And we're doing it properly, we're administering it properly — the world seems to think that we're doing a good job, and we're confident we'll continue to do a good job."

The Mohawk territory is recognized as a world leader in internet gaming, and has no qualms about its reputation, band council officials said.

"I'm not just making that up," said Delaronde.

"You go to any of the publications around the world about this and Kahnawake is well-respected. Its jurisdiction is unquestioned. The only place where there is a question is in [our] backyard."

The charges and fines could set a precedent for Mohawk-issued gaming licences, according to Toronto-based lawyer Michael Lipton, who practises gaming law.

"It's never been settled in court, and you might say it's a bit of a grey area," he told CBC News. "So that's where the Kahnawake Mohawks get their strength from, and that's what they're doing."

The charges and fines reflect the government's decrease tolerance for online gaming, he said.