The 2-1 ruling by the 11th U.S. Circuit Court of Appeals could encourage other states to adopt so-called alien land laws, which were once common but fell out of favor a century ago.
A federal judge said Chanthila "Shawn" Souvannarath should remain in the country so he could present what the judge called a "substantial claim of U.S. citizenship."
Kapil Raghu, 28, was arrested in May after an officer in central Arkansas spotted the rollerball perfume bottle in his car during a routine traffic stop.