The Thai Constitutional Court said Prime Minister Prayuth Chan-ocha has not violated the constitution due to a conflict of interest.

Prayuth did not need to step down even though he lives in an army house as the former army chief because his residency did not constitute as serving his own interest or giving him monetary benefits.

The protesters have set a stage at Lad Phrao intersection to look like a court room, with one protest leader, Atthapol Buapat, wielding a sledgehammer to smash an empty Thai shrine in a symbol of defiance against the court's verdict.

Both the shrine and the court are the same word in Thai.

"The fight is not over. When (he) can do no wrong, this nation is headed to a breaking point," the Free Youth protest group said on Facebook following the ruling, adding that they will continue to stage "waves" of major rallies.

The case was filed by the opposition Pheu Thai party.

Prime Minister Prayuth has yet to comment on the court ruling.

The Constitutional Court had previously discouraged protesters from gathering near the court and steel barriers were put up near the court building.

It has also issued a statement that warned dissenters to refrain from making any harsh criticism regarding its verdict on Tuesday.

The ruling comes after months of protesters demanding Prayuth's resignation as well as the scrapping of the constitution and a reform of the monarchy.

Prayuth had earlier defended the fact that his family had to stay at the army house for security reasons.

Australian Associated Press