The government banned the use of unregulated settings, which provide accommodation but limited or no support for children in care, for under 16s in September last year.
But children's rights charity Article 39 took legal action against the Department for Education, calling for a judicial review into a "failure" by the government to extend the ban to ensure young people receive mandatory care to the age of 18.
This call has been dismissed by the High Court.
Article 39 claimed during a hearing at the High Court that it is “irrational” to make a distinction between children above and below the age of 16.
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