The antitrust lawsuit filed in January by Governor Tom Corbett sought to have all the NCAA sanctions thrown out. The ruling lets stand an unprecedented $60 million fine imposed on the university and upholds the NCAA's move to void all Penn State's football team victories over more than 14 seasons.
The lawsuit claimed the sanctions would cause economic fallout throughout the state and was filed on behalf of third parties such as stadium workers, shopkeepers, hoteliers and others whose businesses could be hit due to the penalties.
U.S. District Court Judge Yvette Kane said the lawsuit's arguments "fail to advance the ball."
The lawsuit "raises serious questions about the indirect economic impact of NCAA sanctions on innocent parties," she wrote in her ruling. "These are important questions deserving of public debate, but they are not antitrust questions."
Sandusky, Penn State's former defensive coordinator, was convicted last June of 45 counts of sexually abusing 10 boys over 15 years, some in the football team's showers. He was sentenced to 30 to 60 years in prison.
In July, the NCAA, the governing body of U.S. collegiate sports, filed its sanctions against Penn State for the school's failure to stop Sandusky's sexual abuse of children.
In a statement issued on Thursday, the NCAA said it hoped the decision would "serve as a beginning of the end of the divide among those who, like Penn State, want to move forward to put the horror of the Sandusky crimes behind the university and those who want to prolong the fight, and with it, the pain."
Legal analysts at the time it was filed called the lawsuit a long shot, saying it would be difficult to convert any harm done to local businesses into an antitrust violation. The state would have to show that the penalties harmed consumers and constituted a breakdown in the competitive marketplace, they said.
Penn State was not involved in the lawsuit.
