That law was designed to stop online gambling by choking off the electronic processing of money for online wagers or payouts.
The industry group had argued that the law was unconstitutional on many fronts, including freedom of speech and invasion of privacy concerns. It wanted the court to declare that people should be allowed to gamble from the privacy of their own homes.
"You're looking at a law criminalizing an activity online that is legal off-line in 48 of the 50 states," said Joe Brennan Jr., the group's chairman. "If I have that right off-line in the real world, I should have that right online."
In dismissing the group's challenge to the law, the judge did not get involved in whether the law should have been passed.
"The plaintiff's claims express a fundamental disagreement with Congress's judgment that Internet gambling should be controlled legislatively, and pose questions as to whether (the law) ... will be successful in accomplishing its desired ends," she wrote. "But it is not the court's role to pass on the wisdom of a Congressional act or speculate as to its effectiveness."
The law was legally enacted and does not violate the Constitution, she ruled in dismissing the association's challenge.
But she did rule that the association has legal standing to challenge the law in a federal appeals court. Brennan said an appeal would be filed within the next two months.
He also said the judge's decision granting the association the right to further challenge the law was a victory.
"That is huge for us because that's what the government had been fighting," he said.
The ruling was issued on Tuesday and publicized by the association on Thursday.
Charles Miller, a spokesman for the U.S. Department of Justice, said the department is reviewing the decision, and would have no further comment.
