The deliberation, which needed an 80 percent majority to go through, was prompted by a request submitted on Thursday by Swiss bank UBS.
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The ISDA committee will now hold an auction to settle the outstanding CDS transactions.
Argentine bonds extended losses in the immediate aftermath of the decision.
"Generally bonds are lower by 1 to 2 points,'' one New York-based trader said. "Things got hit further.''
Argentina's Discount 2033s denominated in U.S. dollars and euros traded at cash prices as low as 86 and 81 respectively after ISDA's announcement, he said.
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The judge overseeing Argentina's dispute with a group of creditors on Friday told lawyers for the country that a settlement is the "only avenue'' for the case to be resolved and instructed the parties to keep working with the court-appointed mediator.
"Nothing that has happened this week has removed the necessity of working out a settlement,'' said U.S. District Court Judge Thomas Griesa.
A sovereign default happens when a country fails to pay what it owes to its creditors—in this case, Argentina's inability to pay investors holding bonds that were issued prior to 2001, the year in which it entered a prior default on more than $80 billion of obligations.
Argentina had until June 30 to pay what it owed to the exchange bondholders, which was about $539 million in interest. The country dispatched that money to Bank of New York Mellon, which handles the exchange bonds, in June—but after a U.S. judge ruled that the holdout creditors (who refused to restructure their bond agreements with the country) had to be paid about $1.33 billion in tandem with the exchange creditors, the situation hit a stalemate.
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There was a 30-day grace period associated with the June 30 deadline, which elapsed at the end of the day Wednesday.
Reports surfaced Thursday morning that JPMorgan Chase had approached some of Argentina's dissident bondholders about buying some of the sovereign debt.
One such bondholder, Aurelius Capital Management said in a Thursday statement that it has not yet seen any "worthy" private-sector offers regarding the possible purchase of the Argentine bonds.
—By Reuters with CNBC.com.