Magistrate Daniel Reiss ordered the 55-year-old Duggan to remain in prison.
He has 15 days to seek a review of the magistrate’s ruling. The decision to extradite will ultimately be made by Australia’s Attorney General.
A highly regarded jet pilot, Duggan spent 12 years in the US Marine Corps, reaching the rank of Major and working as a tactical flight instructor.
Duggan’s wife and mother of his six children, Saffrine Duggan, said the extradition court hearing was “simply about ticking boxes.”
She also said the family would appeal the extradition.
“Now, we respectfully ask the attorney general to take another look at this case and to bring my husband home,” she told a gathering of reporters and supporters outside court.
The pilot has spent 19 months in maximum-security prison since he was arrested in 2022 at his family home in the state of New South Wales.
Duggan moved to Australia in 2002 after leaving the Marines, gaining citizenship and working in an adventure flight company called Top Gun Tasmania.
Prosecutors say Duggan received about nine payments totalling around 88,000 Australian dollars (US$61,000) and international travel from another conspirator for what was sometimes described as “personal development training.”
The indictment says Duggan travelled to the US, China and South Africa, and provided training to Chinese pilots in South Africa.
Duggan has denied the allegations, saying they were political posturing by the United States, which unfairly singled him out.
Duggan’s lawyers had previously argued there is no evidence the Chinese pilots he trained were military, and that he became an Australian citizen in January 2012, before the alleged offences.
The United States government has argued Duggan did not lose his US citizenship until 2016, when he signed a document renouncing it in the US embassy in Beijing.
One of seven co-conspirators in the US indictment is convicted Chinese hacker Su Bin, although Duggan’s lawyers argue the hacking case is unrelated.
Duggan was barred from leaving China in 2014, his lawyer wrote in a filing to the attorney general, and knew Su Bin as an employment broker for Chinese aviation company AVIC.
Su Bin pleaded guilty in 2016 to theft of US military aircraft designs by hacking major US defence contractors.
Reporting by Agence France-Presse, Associated Press, Reuters