It was initially reported that Armstrong asked U.S. District Judge Christopher Cooper to dismiss the case with a summary judgment ruling, but instead the judge made a decision to favor the federal government who have sued the cyclist on behalf of the U.S. Postal Service.
US District Judge Christopher Cooper ruled on Monday, that the case must be decided by a jury.
A trial date has not yet been set for the case.
The case, which was brought by Armstrong's former teammate Floyd Landis and the U.S. federal government, alleges that Armstrong and his team's owner Tailwind Sports, along with team directeur sportif Johan Bruyneel, violated the False Claims Act (FCA).
After years of denials, Armstrong admitted in 2013 he had used performance-enhancing drugs while racing.
After losing his sponsorships, being stripped of his titles and awards, and finally stepping down as chairman from his cancer foundation in 2012, Armstrong also lost a separate fraud lawsuit in 2015.
USPS paid US$32.3 million in sponsorship dollars to the cycling team between 2000 and 2004.
"Giving Armstrong "credit" for the benefits he delivered while using (performance-enhancing drugs) could be viewed as an unjust reward for having successfully concealed his doping for so long", Cooper wrote.
Braves and Reds maneuver
The three-time All-Star is also one of the best defenders in the game, having earned four Gold Glove awards during his career. McKirahan held a 5.93 ERA over 27 appearances for the Braves in 2015 and missed all of 2016 following Tommy John surgery.
The defendant's legal team had tried to have the case dismissed by claiming that there had been minimal impact on the USPS brand.
Cooper agreed with evidence that the USPS "received substantial benefits as a direct result of the sponsorship", citing internal USPS communications and valuation studies by third parties.
The ruling marked a major victory for the government since it joined a 2010 whistleblower lawsuit brought by Armstrong's former teammate Floyd Landis.
Eliot Peters, an attorney for Armstrong, did not respond to a request for comment.
Landis stands to obtain 25 per cent of any money recovered from Tailwind Sports and Armstrong.
The cancer survivor was stripped of his seven tour victories after the United States anti-doping agency uncovered a clandestine and sophisticated doping programme. "So the government may now proceed to a trial that, as a practical matter, it can not win". But the swift dumping of him by others around that time showed his endorsement had no value, the government argued.
"Landis attorney Paul D. Scott said he was delighted" to see the case move toward trial.