Arbitrator Richard Bloch ruled against a grievance filed by the NHL Players Association, which sought to block the league's ruling that Kovalchuk's contract is illegal on the grounds it circumvented the salary cap.
The players' union argued it did indeed conform to the current collective bargaining agreement.
Bloch's decision means the high-scoring Russian superstar is again an unrestricted free agent. The Devils have said they and Kovalchuk's agent will tinker with the terms of the deal and resubmit it to the NHL.
The arbitrator's decision also means the league has the option to fine the Devils up to $5 million and eliminate future draft picks.
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