A federal appeals court on Wednesday dealt a blow to United States regulators by rejecting the Federal Trade Commission’s attempt to block Microsoft’s $69 billion acquisition of video game giant Activision Blizzard.

In a unanimous decision, a three-judge panel of the 9th U.S. Circuit Court of Appeals upheld a lower court’s ruling that denied the FTC’s request for a preliminary injunction. The court found that the FTC had failed to demonstrate a likelihood of success in its argument that the blockbuster deal would harm competition in the gaming industry.

The ruling clears another legal hurdle for Microsoft, which closed the acquisition in late 2023 following final approval from UK regulators. The deal remains the largest ever in the video game sector.

The FTC first filed suit against the merger in 2022, warning that it could give Microsoft — maker of the Xbox console — unfair control over key game titles and services, including subscription and cloud-based gaming. The agency argued the acquisition would allow Microsoft to suppress competition by limiting rival access to popular franchises like Call of Duty.

But U.S. District Judge Jacqueline Scott Corley rejected those concerns in July 2023, ruling that the FTC had not proven the merger would “substantially lessen competition” in the gaming market. On appeal, the 9th Circuit affirmed that decision, saying the lower court had used the appropriate legal standard.

The FTC also launched a parallel administrative case to challenge the merger internally, but that proceeding was paused last year pending the outcome of the appeal.

The case is one of several high-profile efforts by the Biden administration to challenge major tech mergers under broader antitrust enforcement. While the decision is a setback for regulators, it cements Microsoft’s position as a dominant force in the global gaming industry.