Omar Said Omar pleaded not guilty in Nairobi magistrate's court to four counts of illegally possessing an assortment of firearms, including missile launchers and assault rifles, and forged identification cards.
Prosecutor Edwin Okello said Omar, a computer expert who was arrested immediately after he and three others were acquitted on Thursday in the hotel bombing case, was a threat to society and should be denied a provisional release.
"He is a security threat to the public and he should not be given bail. He is also likely to abscond due to the seriousness of the charge," said Okello, who led the unsuccessful 19-month prosecution of Omar and his co-defendents.
But defence lawyer Winston Ngaira argued it would be unfair to keep his client in jail, noting that he had been already held for nearly two years on charges for which he was ultimately found not guilty.
"Omar has been in custody since 1 August 2003, it would be unfair for him to remain there since the offences he is charged with are bailable and not capital," Ngaira told the court.
Chief magistrate Aggrey Muchelule said he would consider the bail issue on Monday.
Ngaira has said that the United States wants to extradite Omar, possibly to testify against accused terrorists in US courts.
US officials have declined to comment on the matter but are thought to be interested in Omar for questioning about the 1998 bombings of the US embassies in Nairobi and Dar es Salaam and other acts.
Omar (R) has been in jail since
Kenyan police arrested Omar and two other suspects - Feisal Ali and Fazul Abdullah Mohammed, the alleged mastermind of the hotel and embassy bombings - in Mombasa on 1 August 2003.
But while being taken to the police station, Feisal Ali detonated a grenade, killing himself, and Fazul Abdullah Mohammed, a suspected operative in Osama bin Laden's al-Qaida network, escaped in the commotion that ensued.
Ten days later, police announced they had seized five anti-tank weapons, six AK-47 rifles, each with 30 rounds of ammunition, a hand grenade, literature on weapons training and forged identity cards from Omar's house.