A US government lawsuit seeking $100 million in damages from disgraced cyclist Lance Armstrong has been given the go ahead.

The US Justice Department took up the case on behalf of the Postal Service in 2013 after Armstrong admitted to using performance enhancing drugs.

The lawsuit, which was originally filed by his former teammate Floyd Landis, claims that Armstrong defrauded the government by covering up his doping in order to keep getting paid for his US Postal Service sponsorship deal.

Following his confession in 2012 Armstrong had his seven Tour de France titles taken away and was banned from competitive cycling.

He has tried to have the lawsuit dropped by claiming that the sponsorship was worth more to the Postal Service than the $32 million it paid to his team, Tailwind Sports Corporation. However, the government countered by arguing that the negative fallout from the doping scandal tainted the agency because of its association with Armstrong.

That amount can be tripled in damages if Armstrong loses the case. However, his lawyers suggest media exposure for USPS was worth at least $160m.

The case has been considered since last year by US District Judge Christopher Cooper and he has decided that the matter should go before a jury. Landis, who originally brought the claim in 2010, stands to get up to 25 per cent of any damages despite the fact that he was stripped of his 2006 Tour de France title for doping.

Armstrong has had a number of other financial hits since the doping scandal. He lost all of his major sponsors and has been forced to pay more than $10 million in damages and settlement. However, this lawsuit has the potential to be the largest so far.