Bush campaign spokesman Scott Stanzel said the ads will continue through Sunday, the final day of the Athens Games (search).
"We are on firm legal ground to mention the Olympics to make a factual point in a political advertisement," Stanzel said.
The USOC asked the campaign to pull the ads on Thursday, committee spokesman Darryl Seibel said. The ad shows a swimmer and the flags of Iraq and Afghanistan.
"In 1972, there were 40 democracies in the world. Today, 120," an announcer says. "Freedom is spreading throughout the world like a sunrise. And this Olympics there will be two more free nations. And two fewer terrorist regimes."
Some of the players on the Iraqi Olympic soccer team have complained about the ad appearing as part of a political campaign.
The International Olympic Committee and the USOC have the authority to regulate the use of anything involving the Olympics.
"We own the rights to the Olympic name, and no one has asked us," said Gerhard Heiberg, the Norwegian IOC representative and IOC market commission leader.
Heiberg told the Norwegian news agency NTB: "We're watching, and we hope they will stop the commercial."
An act of Congress, last revised in 1999, grants the USOC exclusive rights to such terms as "Olympic," derivatives such as "Olympiad" and the five interlocking rings. It also specifically says the organization "shall be nonpolitical and may not promote the candidacy of an individual seeking public office."