Chad Stratton was arrested and fined at a Black Lives Matter protest on July 28, 2020 at The Domain behind NSW Parliament House.
Ruby Pandolfi was fined at a transgender rights protest in Sydney's Taylor Square on October 10 that year.
They were fined for failing to comply with a public health order stipulating a person "must not participate in an outdoor public gathering of more than 20 people" as part of the NSW government's response to the COVID-19 pandemic.
"Both Mr Stratton and Ms Pandolfi were arrested in the course of engaging in outdoor protest activity which involved a gathering of more than 20 people," court papers read.
The pair challenged the fines but Supreme Court Justice Anna Mitchelmore ruled they do not have a case on Thursday.
The Public Health Act the fines were issued under "does not impose an unjustified burden on the implied freedom" of political communication, she said.
"It follows that the Penalty Notices are valid and the Summons must be dismissed," she wrote in her published reasons.
The pair challenged the penalty notices and sought to establish they were invalid under two sections of the health act.
"The plaintiffs have not succeeded in either respect," Justice Mitchelmore wrote.
She dismissed the summons, making no order on costs after noting an agreement had been reached between the parties.
Emma Hearne, a National Justice Project solicitor representing the protesters, said she would be pursuing other options for her clients to have the fines withdrawn "based on another recent Supreme Court judgement".
"The fight is not over – we will be assessing our options over the coming weeks," Ms Hearne said in a statement.
"We won't let the NSW government muzzle our democracy without a fight. We will continue to challenge police and government overreach, because our rights are too important to delegate to a minister," she added.
Ms Hearne said the decision will embolden state governments across Australia in crackdowns on the right to protest and highlights the need for stronger protections of civil and human rights in NSW.
"Instead of vague protections implied through the Constitution, we need a strong Human Rights Act to protect citizens from further dilution of their democratic freedoms," she said.