The annual New Year's Eve celebration in Brasstown -- about 100 miles west of Asheville -- involves trapping it in a cage then lowering it at midnight.
For the past year, PETA has argued that the New Year's celebration with fireworks and crowds of people upsets nocturnal creature.
The organization maintained that the event organizer, Clay Logan, had every right to kill the animal since his hunting license allowed it, but the group's attorney argued that he was not allowed to capture it and put it on display outside his store.
PETA's attorney claimed that since Logan did not meet requirements for keeping captive animals, the state invented a special permit late last year.
Tuesday's ruling sided with PETA stating that the Wildlife Resources Commission should not have issued any permit or license for possessing or publicly displaying a live opossum, without authority to do so by the General Assembly.