By Daniel Wiessner

July 22 (Reuters) - A U.S. appeals court on Tuesday said New Jersey cannot ban the detention of immigrants awaiting deportation within its borders, agreeing with private prison operator CoreCivic CXW.N that it "destroys the federal government's marketplace" for detention facilities crucial to immigration enforcement.

The 2-1 ruling by the Philadelphia-based 3rd U.S. Circuit Court of Appeals upholds a judge's decision in favor of CoreCivic, which operates about 70 U.S. detention centers nationwide. CoreCivic sued New Jersey after it passed a law in 2021 that threatened the renewal of a contract to operate a 300-bed facility near Newark Liberty International Airport.

Privately run detention centers have come under renewed scrutiny as the administration of Republican President Donald Trump has filled existing centers to capacity amid an aggressive immigration enforcement campaign.

The administration has restricted members of Congress and other officials from touring the facilities, where advocates say conditions can be cramped and inhumane.

The 3rd Circuit on Tuesday said New Jersey's law barring new contracts to operate immigrant detention centers violates the U.S. Constitution by interfering with the federal government's enforcement of immigration laws.

"Just as the federal government cannot control a state, so too a state cannot control the federal government," Circuit Judge Stephanos Bibas, a Trump appointee, wrote for the court.

Bibas was joined by Circuit Judge Cheryl Ann Krause, an appointee of Democratic President Barack Obama. Circuit Judge Thomas Ambro, who was appointed by Democratic President Bill Clinton, said in dissent that New Jersey's law only directly regulates the state, local governments and private companies.

CoreCivic's challenge has been backed by the U.S. Department of Justice under Trump and his Democratic predecessor, Joe Biden. The U.S. government has told the court that it relies heavily on private immigrant detention, particularly to manage fluctuations in the number of deportable immigrants.

CoreCivic spokesman Ryan Gustin in a statement said the company "has played a limited but important role" in the U.S. immigration enforcement system for more than 40 years, and was grateful that the 3rd Circuit upheld the government's discretion to rely on it.

New Jersey Attorney General Matthew Platkin, a Democrat, in a statement said entrusting detention to private companies poses grave risks to health and safety. He said his office is considering its next steps.

The New Jersey Alliance for Immigrant Justice, an advocacy group, said the ruling was based on the false premise that immigrant detention is a core function of the federal government.

“What New Jersey achieved through the democratic process has now been undone by judicial fiat to protect the profits of corporations whose mission is not to serve the United States Constitution, but to deliver profits for their shareholders,” Amy Torres, the group's executive director, said in a statement.

A U.S. appeals court in 2022 blocked a similar California law in a lawsuit by GEO Group Inc GEO.N, CoreCivic's top rival. The same year, a different appeals court upheld an Illinois law barring the state, but not private companies, from entering into contracts to operate detention centers.

(Reporting by Daniel Wiessner in Albany, New York; Editing by Alexia Garamfalvi and Leslie Adler)

((daniel.wiessner@thomsonreuters.com))