James Goddard missed out on Britain's second swimming medal of the Games as Aaron Peirsol was reinstated as winner of the 200m backstroke.
Goddard was hoping for a medal
Goddard was pipped in the final metres for third as Peirsol beat Austria's Markus Rogan to the gold medal.
Goddard appeared to have won bronze when Peirsol was disqualified for a freestyle kick at the 150m mark.
But the American was reinstated after a protest and a British counter-protest was later rejected.
Team GB say they may now take their appeal to the Court of Arbitration for Sport, with British swimming chief Bill Sweetenham claiming: "The infringement was obvious.
"To have it overturned because of incompetent paperwork is nonsensical."
Peirsol touched first to win by more than two seconds in a new Olympic record of 1:54.95.
He was climbing out of the pool with a smile on his face when the disqualification flashed up on the scoreboard.
He was then reinstated for 'lack of information'.
"The disqualification of Aaron Peirsol was not accepted due to the detail of the reason supplied by the official being inadequate and not in the working language of FINA," said a statement.
Peirsol said: "I feel bad for the guys who went out through that emotional rollercoaster.
"It was an unfortunate mistake by somebody but it happens. It was a weird way to win."
Goddard, from the same Stockport Metro club as Britain's bronze medallist Stephen Parry, was initially reluctant to accept the medal in any case, after clocking 1:57.76.
"It was harsh on the guy who won," he said. "We are aware of the marker and I can't imagine he went past 15m.
"I'm not happy really but I've got another four years and I'm sure I'll be in Beijing."