A U.S. district judge in Washington ruled Tuesday that the Federal Election Commission wrongly narrowed a rule determining when certain politically active groups have to disclose their donors, throwing out the regulation and setting up another showdown at the sharply divided agency.

The case hinges on a 2007-era regulation stating that organizations that run so-called “issue ads” close to Election Day only have to reveal donors who give for the explicit purpose of financing those ads. Under the rule, few groups running such ads have reported their contributors.

The regulation was challenged in 2011 by Rep. Chris Van Hollen (D-Md.), who was represented by WilmerHale attorney Roger Witten, joined by lawyers for the advocacy groups Democracy 21, Public Citizen and Campaign Legal Center. They argued that it created a massive loophole and gutted the intent of the 2002 McCain-Feingold Act. Among other things, that far-reaching law required groups that engage in "electioneering communications" to reveal all contributors who give $1,000 or more.

In her opinion, Judge Amy Berman Jackson agreed, calling the FEC rule “arbitrary, capricious, and contrary to law.”

The regulation was “inconsistent with the statutory language and purpose” of the 2002 legislation and “contrary to the policy goal that Congress intended to implement,” she wrote.

In a statement, Van Hollen called the ruling "a victory for democracy."

"In light of the record level of outside secret money funneled into the recent elections, this decision will greatly improve the much needed transparency of ‘electioneering communications’ that voters deserve in determining who is trying to influence their votes," he said.

Jackson's decision sends the matter back the FEC, which must decide whether to appeal or attempt to craft a new rule. The issue is likely to trigger contentious debate on the six-member panel, which is evenly split along ideological lines. In recent years, the commission’s GOP members have resisted efforts to expand disclosure requirements.

FEC Chairman Lee Goodman, the most recent Republican appointee to the commission, said Tuesday that the panel will examine Jackson’s decision before deciding how to proceed.

“I’ve always said that I’m open to judicial guidance on this issue, and now we’ll have to study the court’s opinion to determine exactly what obligation the FEC has in response,” he told the Washington Post.

Advocates for more transparency in campaign spending urged the agency to come up with a more expansive rule requiring groups spending money on election-related ads to reveal their backers.

“The FEC really has an obligation now to issue an effective disclosure regulation that serves the interests of the American people, rather than the interests of anonymous donors and the federal officeholders who are benefiting from their contributions,” said Fred Wertheimer, president of Democracy 21.

Thomas Kirby, an attorney for the Center for Individual Freedom, a conservative group that intervened in the case, said his client “respectfully disagrees” with the judge’s decision.

“The ruling creates an upside down world in which greater burdens are imposed on those who merely refer to a candidate than on those who expressly advocate election or defeat of a candidate,” he said.

Jackson’s opinion is the latest twist in a long-running case that is being closely watching by political operatives on both sides of the aisle.

In her strongly worded opinion, she said the FEC rule undermined the intent of Congress “to enable voters to be informed about who was trying to influence their decisions.”

“A donor can avoid reporting altogether by transmitting funds but remaining silent about their intended use,” she added.

Jackson dismissed arguments that the privacy concerns of donors should outweigh disclosure.

“The fact that some contributors ‘just don’t want their names known’ does not provide grounds to override a clear Congressional choice in favor of transparency,” she wrote.