The 8th US Circuit Court of Appeals ruled on Monday that the 2014 lower court verdict failed as a matter of law.
Mr. Ventura, the former professional wrestler and Minnesota governor, sued veteran and Navy Seal Chris Kyle over a claim in the sniper’s autobiography that he punched Mr. Ventura at a California bar in 2006.
A jury awarded Mr. Ventura $500,000 for defamation and $1.3m for unjust enrichment.
On Monday, the federal appeals court reversed the unjust enrichment award and vacated the defamation award.
The court also ordered a new trial on the defamation portion of the case.
Mr. Kyle claimed in his book American Sniper that he punched a man, whom he later identified as Mr. Ventura, after he allegedly said the SEALs “deserve to lose a few” in Iraq.
Mr. Ventura, who served as a member of the Underwater Demolition Team during Vietnam, denied the altercation took place.
He testified in court that the story ruined his reputation among the SEALs community, and that his income as a television personality fell sharply as job offers dried up following the book’s release.
Mr. Kyle said in testimony videotaped before his death last year that his story was accurate.
Mr. Kyle, regarded as the deadliest sniper in US history, was shot dead by a veteran at a Texas shooting range in February 2013.
His bestselling book became a hit Clint Eastwood film starring Bradley Cooper and Sienna Miller.