US competition watchdog, the Federal Trade Commission (FTC), has lost a new attempt to temporarily block Microsoft from completing its deal to buy the maker of Call of Duty.
The technology giant’s proposed $69bn (£52.6bn) purchase of Activision Blizzard would be the biggest of its kind in gaming industry history.
The planned deal has faced a series of legal challenges in the US and split regulators around the world.
It is due to completed by 18 July.
Late on Thursday, US District Judge Jacqueline Scott Corley rejected a request from the FTC to temporarily halt attempts to close the Microsoft-Activision deal.
It was the latest ruling in a long-running legal battle between Microsoft and the FTC over the planned takeover.
The FTC has since asked a different court for a “temporary pause” on the deal.
Any outstanding regulatory issues would make it more likely that Microsoft and Activision would have to negotiate an extension to their planned completion date.
Without an agreement either company would be able to walk away from the deal. If the takeover does not go ahead Microsoft would be liable to pay Activision a breakup fee of up to $3bn.
Microsoft did not immediately respond to a BBC request for comment.
Earlier this week, Microsoft president Brad Smith said the company was “disappointed that the FTC is continuing to pursue what has become a demonstrably weak case”.
“We will oppose further efforts to delay the ability to move forward,” Mr Smith added.
To address the FTC’s concerns, Microsoft had agreed to license the hit video game Call of Duty to rivals, including a 10-year contract with Japan’s Nintendo, if the deal was completed.
The takeover was also struggling to get regulatory approval in the UK until earlier this week.
After the ruling in California, the UK’s Competition and Markets Authority (CMA), which had been opposed the transaction, said a reworked deal could meet its requirements, subject to a new investigation.
European Union regulators have approved the deal, saying that Microsoft had addressed their competition concerns.
