PHILADELPHIA — New Jersey has the right to make sure go-go dancers in the state don't get too risque, a federal appeals panel ruled this week.

The ruling was released July 18 in a case involving Moulin Rouge, an Atlantic City bar.

State troopers went undercover there in 2003 and observed dancers engaged in what was later described as lewd or immoral behavior. It wasn't simply that the women were dancing while scantily clad in bikinis. They were observed rubbing themselves and patrons — including an officer — in sexually explicit ways.

The state's Division of Alcohol Beverage Control issued a $10,000 fine on the grounds that the bar violated a regulation against "lewdness or immoral activity" in places with licenses to sell alcohol. The bar paid but challenged the regulation.

A three-judge panel of the Philadelphia-based 3rd U.S. Circuit Court of Appeals heard the case. One judge died before the opinion was written. The remaining two agreed that New Jersey had the right to regulate the go-go dancers.

The judges wrote in 181 South Inc. v. Fischer that the regulation doesn't prevent lewdness or immoral activity everywhere. "Rather, it only prohibits such activity from taking place on the premises of liquor-licensed establishments," they wrote.

Daniel A. Silver, a First Amendment lawyer who argued the case for Moulin Rouge, said the ruling was wrong — and could change the bars.

"If a dancer in a bikini touches her breast and that's considered lewd, then she can't dance," Silver told The Philadelphia Inquirer for yesterday's editions. "She has to just stand there."