The U.S. Supreme Court on Wednesday struggled to reconcile the broad power of states to regulate the distribution of alcohol within their borders with a competing constitutional restriction that local officials must not discriminate against out-of-state economic interests.

At the center of the conflict, whose outcome could have national economic repercussions, is Tennessee’s two-year residency requirement for retail liquor licenses. The U.S. Court of Appeals for the Sixth Circuit held that the two-year requirement discriminated against out-of-state retailers. The Constitution’s dormant commerce clause prohibits state legislation that discriminates against interstate commerce.

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