(Corrects to largely 2-1 ruling in second paragraph)

By Daniel Trotta

Sept 16 (Reuters) - A U.S. appeals court on Friday upheld a Texas law that bars large social media companies from banning or censoring users based on "viewpoint," a setback for technology industry groups that say the measure would turn platforms into bastions of dangerous content.

The largely 2-1 ruling by the 5th U.S. Circuit Court of Appeals, based in New Orleans, sets up the potential for the U.S. Supreme Court to rule on the law, which conservatives and right-wing commentators have said is necessary to prevent "Big Tech" from suppressing their views.

"Today we reject the idea that corporations have a freewheeling First Amendment right to censor what people say," Judge Andrew Oldham, an appointee of former President Donald Trump, wrote in the ruling.

The Texas law was passed by the state's Republican-led legislature and signed by its Republican governor.

The tech groups that challenged the law and were on the losing end of Friday's ruling include NetChoice and the Computer & Communications Industry Association, which count Meta Platforms' Facebook, Twitter and Alphabet Inc's YouTube as members.

They have sought to preserve rights to regulate user content when they believe it may lead to violence, citing concerns that unregulated platforms will enable extremists such as Nazi supporters, terrorists and hostile foreign governments.

The association on Friday said it disagreed with forcing private companies to give equal treatment to all viewpoints. "'God Bless America' and 'Death to America' are both viewpoints, and it is unwise and unconstitutional for the state of Texas to compel a private business to treat those the same," it said in a statement.

Some conservatives have labeled the social media companies' practices abusive, pointing to Twitter's permanent suspension of Trump from the platform shortly after the Jan. 6, 2021, attack on the U.S. Capitol by a mob of his supporters. Twitter had cited "the risk of further incitement of violence" as a reason.

The Texas law forbids social media companies with at least 50 million monthly active users from acting to "censor" users based on "viewpoint," and allows either users or the Texas attorney general to sue to enforce the law.

Texas Attorney General Ken Paxton on Twitter hailed the ruling as "massive victory for the constitution and free speech."

Because the 5th Circuit ruling conflicts with part of a ruling by the 11th Circuit, the aggrieved parties have a stronger case for petitioning the Supreme Court to hear the matter.

In May, the 11th Circuit, based in Atlanta, found that most of a similar Florida law violates the companies' free speech rights and cannot be enforced. (Reporting by Daniel Trotta; Editing by Alexia Garamfalvi and Leslie Adler)