However, the justices' ruling was limited, and didn't deal with the biggest concern in the case – whether religious people like Jack Phillips could refuse to serve gay or lesbian people.
The 7-2 limited ruling Monday turns on what the court described as anti-religious bias on the Colorado Civil Rights Commission when it ruled against baker Jack Phillips.
After Phillips refused to make a cake for Charlie Craig and David Mullins in 2012, the gay couple filed a complaint with the Commission. The Commission ruled in their favor, saying Phillips had violated the state's anti-discrimination law, which bars businesses from discriminating against customers based on their race, religion, gender, or sexual orientation.
The justices voted 7-2 that the Commission violated Phillips' First Amendment right to exercise his religion.
Phillips was all smiles after the decision was released on Monday
Justice Anthony Kennedy, who was forecast to be the swing vote, wrote the majority opinion, saying Phillips' Free Exercise rights were violated because the Commission showed hostility to his religious beliefs when they were making the decision.
The outcome of the case hinged on the actions of the Colorado commission. In one exchange at a 2014 hearing cited by Kennedy, former commissioner Diann Rice said that 'freedom of religion, and religion, has been used to justify all kinds of discrimination throughout history, whether it be slavery, whether it be the Holocaust.'
When the justices heard arguments in December, Kennedy was plainly bothered by the comments, which seemed 'neither tolerant nor respectful of Mr. Phillips’ religious beliefs'.
That same sentiment suffused his opinion on Monday.
'The commission’s hostility was inconsistent with the First Amendment’s guarantee that our laws be applied in a manner that is neutral toward religion,' he wrote.
Kennedy also noted that the commission had ruled the opposite way in three other cases brought against bakers in which the business owners had refused to bake cakes containing messages they disagreed with that demeaned gay people or same-sex marriage. In all of those cases, the Commission allowed the bakers to refuse to decorate their cakes with a message they found offensive.
When it comes to the question of whether businesses can refuse to serve gay couples because of their religious beliefs, Kennedy said that decision would have to wait until another day.
'The outcome of cases like this in other circumstances must await further elaboration in the courts, all in the context of recognizing that these disputes must be resolved with tolerance, without undue respect to sincere religious beliefs, and without subjecting gay persons to indignities when they seek goods and services in an open market,' Kennedy added.