The administration-hit Ibrox club is now in line for further punishment from Scottish football's governing body after persuading a Court of Session judge yesterday to lift the transfer embargo, which would have lasted for a year.
It had been imposed by a judicial panel of the Scottish Football Association (SFA), along with a fine of £100,000 on the club for bringing the game into disrepute, after former owner Craig Whyte took the club into administration in February.
The SFA, which has been left to foot the bill for Rangers' legal costs, will be required to impose another punishment. Only suspension, a further fine or expulsion remain.
Fifa, world football's governing body, last night warned action must be taken after Rangers' use of the law courts to challenge the embargo.
The exact punishment is yet to be decided, but could involve the club being ejected from next year's Scottish Cup, or further fines.
It could even mean the doomsday scenario of Rangers being thrown out of football, although this remains an unlikely prospect, given the club's economic value to the Scottish game.
The SFA is angry that Rangers deliberately set themselves on a direct collision course with the game's lawmakers, with one source saying: "We could be looking at expulsion now. Rangers should be careful what they wish for."
SFA sources said a half-season suspension for Rangers was pointless, while stopping the team from playing pre-season friendlies was not a strong enough punishment.
Andy Kerr, president of the Rangers Supporters' Assembly, said he was pleased at Lord Glennie's ruling. He said: "We always felt that it was an unwarranted and severe punishment. The case had been funded by a fighting fund set up by fans following administration.
"However, we don't exactly know what is now available to the tribunal. A financial sanction is obviously preferable as it doesn't affect our ability to compete on the field, but now the issue of expulsions from individual competitions or even from the association have been raised.
"The SFA might be feeling a bit sore, particularly as it has to pay the legal costs, but you would think the attitude of a governing body should be 'how do we best help a member club to continue to play?'.
"Fifa said it would prefer that matters relating to the game were not dealt with by the courts, but through the sporting authorities of the jurisdiction, but we thought the best recourse was through the courts because it was a legal matter."
The club had already tried to have the transfer ban removed by going to the SFA's appeal tribunal, whose members include the judge Lord Carloway, only to have the decision upheld.
The club's counsel, Richard Keen, QC, the Dean of the Faculty of Advocates, was able to convince Scotland's highest civil court the punishment was "unlawful".
He said: "We are the victim of an unlawful sanction and we have had imposed on us a sanction that the SFA panel had no right to impose.
"The sanction of suspending the registration of players is not available under the general disciplinary rules to the tribunal in respect of the alleged breach.
"It follows ... that the purported additional sanction imposed by the tribunal and confirmed by the appeal tribunal was not a competent sanction."
Aidan O'Neill, QC, for the SFA, said that
the £100,000 fine was "simply not enough given the gravity of the issues here".
He said that if their powers of penalty were restricted to sanctions such as suspension or expulsion, then suspension would have to be looked at.
Mr O'Neill told the court the paradox was that Mr Keen's argument could lead to greater sanction.
"Suspension would not just simply impose a transfer ban, but would stop any playing of friendly matches in the off-season," he said. "Suspension is a greater sanction than the targeted sanction of the transfer ban that was in fact imposed."
Rangers administrator Duff & Phelps welcomed the decision, adding that it was "regrettable" they had had to take the case to court.
Paul Clark, joint administrator, said: "Both we, and the SFA, will have to study the full ramifications of the judgment when it is published, and either side has 21 days in which to decide the next course of action or whether they wish to appeal."
An SFA spokesman said: "We are surprised by today's verdict at the Court of Session, especially since the original sanction against Rangers FC was imposed by an independent panel chaired by a leading QC and upheld by an Appellate Tribunal chaired by a Supreme Court Judge.
"We will now consider our position with our legal advisers before making any further comment."
Fifa warned that action must be taken after Rangers' use of the law courts to challenge a registration embargo.
It indicated that any governing body was entitled to "direct action" against a club which sought "redress in front of ordinary court" under its articles of association.
It said the situation should be closely monitored "so that the issue is resolved as fast as possible".
European football's ruling body, Uefa, described it as a "domestic matter", saying: "It's up to the Scottish Football Association to make sure that the regulations and national law are adhered to."
