Armstrong, who repeatedly has denied doping, claimed in his lawsuit that USADA lacked jurisdiction and its arbitration process violates his constitutional rights.
U.S. District Judge Sam Sparks dismissed the lawsuit as speculative.
"With respect to Armstrong's due process challenges, the court agrees they are without merit," Sparks wrote in a 30-page order. "Alternatively, even if the court has jurisdiction over Armstrong's remaining claims, the court finds they are best resolved through the well-established system of international arbitration, by those with expertise in the field, rather than by the unilateral edict of a single nation's courts."
Armstrong can try to overturn Sparks' decision by going to the 5th U.S. Circuit Court of Appeals in New Orleans. He also can agree to proceed with USADA's arbitration or accept its sanctions.
In a governing body turf war, the International Cycling Union (UCI) says it has jurisdiction in the Armstrong matter, not USADA. The cyclist could attempt to challenge USADA proceedings before the Court of Arbitration for Sport in Switzerland.
"On balance, the court finds the USADA arbitration rules, which largely follow those of the American Arbitration Association, are sufficiently robust to satisfy the requirements of due process," Sparks wrote. "This court declines to assume either the pool of potential arbitrators, or the ultimate arbitral panel itself, will be unwilling or unable to render a conscientious decision based on the evidence before it. Further, Armstrong has ample appellate avenues open to him."
He cited a 2001 decision by the 7th Circuit in Slaney vs. the International Amateur Athletic Association, an attempt by runner Mary Decker Slaney to overturn an arbitration panel's decision that she committed a doping offense.
"Federal courts should not interfere with an amateur sports organization's disciplinary procedures unless the organization shows wanton disregard for its rules," Sparks said. "To hold otherwise would be to turn federal judges into referees for a game in which they have no place, and about which they know little."
Sparks also cautioned that "the deficiency of USADA's charging document is of serious constitutional concern."
"Indeed, but for two facts, the court might be inclined to find USADA's charging letter was a violation of due process and to enjoin USADA from proceeding thereunder," he said. "First, it would likely be of no practical effect: USADA could easily issue a more detailed charging letter, at which point Armstrong would presumably once again file suit, and the parties would be back in this exact position some time later, only poorer for their legal fees. Second, and more important, USADA's counsel represented to the court that Armstrong will, in fact, receive detailed disclosures regarding USADA's claims against him at a time reasonably before arbitration."
Almost predicting there will be more legal battles in different venues, Sparks found "there are troubling aspects of this case, not least of which is USADA' s apparent single-minded determination to force Armstrong to arbitrate the charges against him, in direct conflict with UCI's equally evident desire not to proceed against him."
"Unfortunately, the appearance of conflict on the part of both organizations creates doubt the charges against Armstrong would receive fair consideration in either forum," Sparks said. "The issue is further complicated by USA Cycling's late-breaking show of support for UCI, and apparent opposition to USADA's proceeding - a wrinkle which does not change the court's legal analysis, but only confirms that these matters should be resolved internally, by the parties most affected, rather than by edict of this court."
Sparks had no desire to intervene in the fight between cycling and drug-testing authorities in a case that cites offenses going back 14 years.
"As mystifying as USADA's election to proceed at this date and in this manner may be, it is equally perplexing that these three national and international bodies are apparently unable to work together to accomplish their shared goal - the regulation and promotion of cycling," Sparks said. "However, if these bodies wish to damage the image of their sport through bitter infighting, they will have to do so without the involvement of the United States courts."
USADA says Armstrong took steroids and blood boosters to win the Tour de France every year from 1999 to 2005. Penalties could include a lifetime ban from cycling and loss of his titles. USADA has said former teammates of Armstrong will testify that his teams had a long-running doping program.
"The rules in place have protected the rights of athletes for over a decade in every case USADA has adjudicated," USADA CEO Travis Tygart said in a statement, "and we look forward to a timely, public arbitration hearing in this case, should Mr. Armstrong choose, where the evidence can be presented, witness testimony will be given under oath and subject to cross examination, and an independent panel of arbitrators will determine the outcome of the case."
Mark Fabiani, a spokesman for Armstrong, declined immediate comment.