Black Watch veteran Richard Scroggie, 48, called former Celtic midfielder Willo Flood a sectarian name during a Scottish Cup tie between Dundee United and Rangers in February this year.
The Rangers fan - who has served in Iraq, Afghanistan, Kosovo and Northern Ireland - admitted shouting at Irish-born Flood during the match at Tannadice on February 2.
But he denied engaging in behaviour likely to incite public disorder by shouting, singing and chanting foul and abusive language of religious hatred during United's 3-0 win, and went on trial at Dundee Sheriff Court over the outburst.
He was cleared of the charge but Sheriff Kenneth Hogg found him guilty of breach of the peace instead - and fined him £150.
As he convicted 48-year-old Scroggie, the sheriff blasted the Offensive Behaviour at Football laws, which Scroggie was prosecuted under.
The sheriff said: "The section of the legislation you were charged under is very confusing.
"I can't convict you under the Offensive Behaviour at Football legislation because I'm not convinced that that one remark would be likely to cause public disorder."
But Scroggie, who served in the Army for 22 years, escaped a live match ban when the sheriff refused a Crown motion to impose a football banning order.
As he fined Scroggie, Sheriff Hogg described the soldier's actions as the "height of stupidity", adding:
"I still can't grasp why people shout this stuff - it has nothing to do with football and it has to stop."