The Colorado Court of Appeals decision affirms a commission's earlier decision that Masterpiece Cakeshop in Lakewood and its owner, Jack Phillips, violated the Colorado Anti-Discrimination Act when he declined to make a cake for Charlie Craig and David Mullins' wedding reception in 2012.
Phillips, a Christian, argued that his refusal to make the cake was based on his religious opposition to the act of same-sex marriage -- a position he asserted was constitutionally protected -- not based on an opposition to their sexual orientation.
Colorado law prohibits places of public accommodation from refusing to serve people based on sexual orientation.
Phillips argued that he doesn't refuse to serve homosexuals, and told Craig and Mullins his shop would sell them any bakery product besides a wedding cake. The appeals court rejected Phillips' position.
"We conclude that the act of same-sex marriage is closely correlated to Craig's and Mullins' sexual orientation, and therefore, (an initial judge) did not err when he found that Masterpiece's refusal to create a wedding cake for Craig and Mullins was 'because of' their sexual orientation,' " the court ruled.
The appeals court also rejected Phillips' arguments that his First Amendment rights to freedom of speech and free exercise of religion were being violated.
Thursday's ruling upholds the Colorado Civil Rights Commission's 2014 ruling that Phillips must create cakes for same-sex celebrations, re-train his staff, and file quarterly reports for two years to confirm the bakery wasn't turning away customers because they were gay or lesbian.
Phillips' lawyer Jeremy Tedesco, the senior legal counsel for the Alliance Defending Freedom, said Phillips would consider further legal options.
Phillips argued that compelling him to make cakes for same-sex marriages compels him to convey a celebratory message about the ceremony, in conflict with his religious beliefs.
The court disagreed.
"By selling a wedding cake to a same-sex couple, Masterpiece does not necessarily lead an observer to conclude that the bakery supports its customer's conduct," the court ruled. "The public has no way of knowing the reasons supporting Masterpiece's decision to serve or decline to serve a same-sex couple."
Ria Tabacco Mar, an ACLU attorney representing the plaintiffs in the Colorado case, told CNN last month that equal protection outweighs any free speech claim.
"What's really at issue here is cake shop's conduct of selling certain products to heterosexual customers and then refusing to sell those same products to lesbian and gay customers," she said.
"When a business opens its doors to the public, it can't discriminate on the basis of sexual orientation, on the basis of race. It can't pick and choose its customers based on who they are," ACLU Colorado Legal Director Mark Silverstein told CNN affiliate KCNC
after the court's ruling.
Tedesco, Phillips' attorney, said Thursday that government has a duty to protect people's freedom to follow their beliefs "rather than force them to adopt the government's views."
"Jack simply exercised the long-cherished American freedom to decline to use his artistic talents to promote a message with which he disagrees. The court is wrong to deny Jack his fundamental freedoms," Tedesco said.
His client also spoke to KCNC.
"I think that the ruling is wrong. The Constitution guarantees me the right to practice my faith, my religion anywhere, anytime. There are no restrictions on it. It also gives me the right to free speech anytime, anywhere. I don't surrender those rights when I open my doors," Phillips said.