"This is really bad. I'm shocked that they declined our application but at the same time granted millions to other political youth association. It's obvious that this is a political and democratic scandal," Kasselstrand told Swedish Radio News.
SDU had applied for SEK 1.2 million which it said would have been used for campaigning work, including campaigns aimed at attracting voters ahead of this year's general election.
Kasselstrand claimed that the National Board for Youth Affairs had declined SDU's application because it disagrees with SDU's ideology.
However, Fredrik Wikström of the National Board for Youth Affairs declined this, saying the application was declined because those who work locally in SDU lack influence over the central organisation and the rules stipulate that such an influence must exist.
"It's not unusual for organisations to apply several times," said Wikström. "They could need more time to develop their organisation. We can see that SDU has come far but they're not quite there yet."
Kasselstrand said SDU plans to organise a protest against the decision at Medborgarplatsen, a central Stockholm square.