The court also imposed a 10-year ban on the party's executive members holding political office.
The ruling against the party comes just ahead of a no-confidence debate in Parliament set to begin Monday against Prime Minister Prayuth Chan-ocha and several Cabinet members.
It was founded in March 2018 as Thailand was heading toward an election after a period of military rule that began with a 2014 coup.
“The Constitutional Court's decision to dissolve the Future Forward Party and to ban its leadership from politics for a decade does great damage to Thailand and its institutions,” said Michael Montesano, coordinator of the Thailand Studies Program at the ISEAS-Yusof Isak Institute in Singapore. “Killing off a party that had channeled the vision and priorities of large numbers of young Thai voters sends a signal that those voters' interests have no legitimacy in the electoral arena.”
Both the U.S. and the EU criticized the ruling as a setback for political pluralism, saying the more than 6 million people who voted for the party risk being disenfranchised.
There are 16 members of the party's executive committee, 11 of whom are members of Parliament and lose their seats. The party's remaining 65 lawmakers can take part in the upcoming no-confidence debate, but must find a new party within 60 days to keep their seats. It was not immediately clear how the 11 empty seats will be filled.
Hundreds of supporters had gathered at the party's headquarters to watch the court ruling. Many shed tears after the verdict was read and held up signs including: “Love Thanathorn,” “We can wait for 10 years. Keep on fighting,” and "The people created FFP, don't rob us of our future!"
Thanathorn later took to the stage with fellow party leaders and encouraged the crowd to stay politically active.
“This is the time to prove they can't destroy us. We must be stronger as they want to grind us into the dirt," he urged. "Therefore, this is the time to stand firm. Don't change your mind. Don't lose your fire. Don't stop dreaming. The Future Forward Party isn't just a political party, but a spirit, people and a journey."
He said a “Future Forward Group” would be established to continue promoting the party's ideas on issues such as social welfare, military reform and local politics. He also announced his plan to set up a private foundation concerned with education and the environment.
The case was referred to the Constitutional Court by the Election Commission, which in December determined that the Future Forward Party had broken the law by accepting a 191 million baht ($6 million) loan from Thanathorn, its co-founder and chief.
The commission said it considered the loan tantamount to a donation, which is limited by law to 10 million baht ($316,000).
The party's main defense was that the law makes no mention of loans. Thanathorn is a billionaire whose family fortune was made in the auto parts industry.
“This is a setback for the opposition parties but may be a political disaster for the military-backed regime," said Kevin Hewison, professor emeritus at the University of North Carolina and veteran Thai studies scholar. "Political uncertainty could potentially destabilize a regime already struggling with several crises and a moribund economy.”
An indication of the extent of popular support for the Future Forward Party could be found on social media, where the broadcast of its leaders had attracted 1 million views by early Friday evening, and the Thai language hashtag #saveFutureForward was trending with 1.5 million tweets on Twitter.
The party's travails are rooted in political battles that Thailand suffered from 2006 to 2014, including two coups and massive street protests involving contending groups, police and the military.
According to Hewison, the Constitutional Court has become highly politicized.
"Its decisions over more than a decade have repeatedly been directed to weakening opposition political parties and to strengthen regimes that represent military-backed interests,” he said in an email interview.
Associated Press journalists Preeyapa T. Khunsong and Tassanee Vejpongsa contributed to this report.