Paul McIntyre, 52, from Derry’s Kinnego Park, is in custody charged with the murder of Ms McKee, possession of a firearm and membership of a proscribed organisation, namely the IRA.
The 29-year-old was observing rioting in Derry’s Creggan estate when she was shot dead on Thursday, April 18, 2019.
The New IRA later admitted responsibility for the murder.
McIntyre denies all charges he faces.
On Tuesday, a defence lawyer told the High Court in Belfast there was insufficient evidence to keep Mr McIntyre in custody.
The lawyer said a decision by the district judge at Derry Magistrates’ Court to grant him bail should be upheld.
On Monday, the High Court heard McIntyre was alleged to have told a former partner he was not responsible for the murder, but that the gunman was the son of another member of a dissident republican group.Although Mr McIntyre was granted bail, he remains in custody, pending an appeal by the prosecution service against the decision.
Mrs Justice Keegan said she would make her ruling later this week.
McIntyre is currently awaiting trial on charges of rioting on the night Ms McKee was shot dead.