Israeli Prime Minister Benjamin Netanyahu attempted to execute a “Hail Mary” decision to legalize dozens of illegal settler outposts deep in the West Bank one day before Biden’s inauguration. He failed.Why it matters: The mass legalization of outposts would have been a highly provocative step, broadening Israeli control over land in the West Bank and further reducing the chances of a future peace deal with the Palestinians.Get smarter, faster with the news CEOs, entrepreneurs and top politicians read. Sign up for Axios Newsletters here.Background: Trump dramatically changed U.S. policy on Israeli settlements in the West Bank, offering them new legitimacy and giving Israel a free hand with regards to settlement activity. * The Biden administration is expected to return to the traditional U.S. policy of treating settlements as illegitimate and objecting to further construction.Driving the news: In recent weeks, Netanyahu tried to put several settlement plans in motion before Biden assumes office, knowing it will be more difficult or even impossible later. * Earlier this week, Netanyahu pressed Minister of Defense Benny Gantz to agree to pass a Cabinet-level decision to legalize five outposts and lay the groundwork to legalize 40 more. * The outposts in question are deep in the West Bank. Some are located in isolated areas in an attempt to prevent Palestinian territorial contiguity. * The settler lobby put pressure on Netanyahu in recent weeks to legalize the outposts and also lobbied his Cabinet ministers.Netanyahu resisted the pressure for a time, but he reversed course as part of his efforts to ensure the support of the settler lobby ahead of the March elections. * Israel's Ministry of Justice opposed the move because Netanyahu's caretaker government is not allowed to make dramatic decisions ahead of the elections. * The Foreign Ministry was also opposed, arguing the step would be seen as a provocative and defiant move 24 hours before Biden’s inauguration and create tensions with the new U.S. administration. * Until an hour before the Cabinet meeting on Tuesday, Netanyahu was still pressing Gantz to agree. Gantz refused and prevented what he called an "irresponsible" move.Worth noting: Last week, the Israeli government approved plans for 800 new housing units in West Bank settlements — half of them in isolated settlements deep in the West Bank. * On Tuesday evening, Israel's land authority began marketing land for the building of 2,600 new housing units in settlements in the West Bank and East Jerusalem.What to watch: In the coming days, the Biden administration will have to publicly articulate its new policy on Israeli settlements. That could renew tensions with the Israeli government.Be smart: sign up FREE for the most influential newsletter in America.