Schmidt said Wednesday that after consulting with several legal experts, he wasnt able to come up with anything that he thought would be strong enough to win his case.
A former top junior golfer in Southern California, Schmidt played professionally for several years before he suffered a heart attack in 2004, when he was just 23.
During his recovery, Schmidt discovered online poker and became one of the games top players. He says he has made more than $3 million in the game, sometimes earning more than $100,000 in good months.
He applied to the USGA to regain his amateur status in 2006 as his health improved.
His request was granted early this year, but problems arose in April when he issued a $1 million challenge on a Web site he co-owns, offering to bet his own money against anyone in a combined poker and golf competition.
The golf governing body said Schmidt gave up his amateur status with that challenge.
Schmidt argued the USGA should not have revoked his status because nobody took him up on his Million Dollar Challenge. But the golf association said it didnt matter because the self-promotion was detrimental to the best interests of the amateur game.
Now that hes dropped the lawsuit, Schmidt said hell work on his game with the intention of playing in some professional events.
Schmidt, who lives in the Portland area, says he has been working on his game with Oregon pro Brian Henninger, a two-time winner on the PGA Tour.
Weve just been working hard to get my game ready, because obviously I have to step it up, Schmidt said.
He said he will try to play in some upcoming professional events but he has not scheduled anything yet.