It would have ruled them out of any incoming transfers for both the winter 2017 and summer 2017 windows.
But the club confirmed CAS have partially approved their appeal against the ban.
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Real Madrid have had their transfer ban halved on appeal
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Real Madrid will not be able to sign players in January
"The Court of Arbitration for Sport (CAS) has today informed Real Madrid C. F. of their decision by which they have partially upheld the appeal lodged by the club against the FIFA resolution which imposed a sanction forbidding the signing of players for two transfer windows, reducing said sanction to just one period, corresponding to the January 2017 transfer window," read a Real statement.
"The decision highlights the injustice of the original ban imposed by FIFA, although the club regrets that the CAS lacked the courage to revoke the ruling entirely."
Barcelona were served a similar transfer embargo for the two transfer windows in 2015, while Atletico have already accepted their ban.
All three clubs were found to have broken rules in relation to signing players under the age of 18.
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Manchester United and Chelsea want to sign James Rodriguez
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Rodriguez may remain at Real this winter as they cannot sign new players
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Rodriguez said after winning the Club World Cup on Sunday that he could leave Real
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Jose Mourinho wants to bring Rodriguez to Manchester United
Express Sport understands both clubs are keen on signing Rodriguez, who last week hinted that he has offers to leave Real.
Spanish newspaper AS claimed Real would not sell Rodriguez in January if CAS ruled that they could not sign a replacement player.
That now appears to be the case, with United and Chelsea now possibly being forced to wait until the summer to complete the deal for Rodriguez.