When the nation repealed Prohibition by means of the Twenty-first Amendment in 1933, it vested primary control over alcoholic beverages in the states. The common understanding of the framers of the Twenty-first Amendment was that it grants each state the power to regulate alcoholic beverages within its borders without intrusion by federal law or regulation. The question remains, however, as to how much and what kind of federal intrusion the amendment blocks.

The Twenty-first Amendment has three parts. Section 1 explicitly repealed the Eighteenth Amendment and brought an end to Prohibition. Accordingly, because many saw the Twenty-first Amendment as nothing but a repeal of the Eighteenth Amendment, Congress passed the resolution without much substantive debate. Most of the legislative debate centered on the issue of saloons and the ratification process codified in Section 3 of the amendment, which mandated the use of state conventions. The amendment was passed by the Senate on February 16, 1933, and by the House four days later. It was the only amendment to have been ratified by conventions in the several states, rather than by the state legislatures. Reportedly, Congress feared that rurally dominated state legislatures might be more likely to reject the repeal of Prohibition. The method resulted in a quick ratification, and it became part of the Constitution on December 5, 1933.

In the original resolution there was an additional section that granted Congress and the states “concurrent power to regulate or prohibit the sale of intoxicating liquors to be drunk on the premises where sold.” This provision was designed primarily to authorize the prohibition of saloons. But members of Congress finally agreed that such regulation belonged with the states, and the section was removed.

Section 2 became the Twenty-first Amendment’s primary source of judicial conflict. The question was whether the amendment gave the states absolute control over alcohol, notwithstanding the Commerce Clause and the Import-Export Clause, or whether the amendment permitted the states only enough autonomy to be dry without infringing on the scope of the rest of the Constitution. The amendment tracks very closely the language of a pre-Prohibition federal statute, the Webb-Kenyon Act (1913), current version at 27 U.S.C. § 122 (1994 ), which gave states power to tax alcoholic beverages not only when sold in the state, but also when sold through the mail in interstate commerce.

After repeal of Prohibition, many states enacted a three-tier distribution system in which each tier is permitted only to sell its product to the next licensed tier, requiring separate licensing for each tier. Discrimination against out-of-state liquor was often routed through the requirements of the three-tier system.

In State Board of Equalization v. Young’s Market Co. (1936) and in Ziffrin, Inc. v. Reeves (1939), the Supreme Court originally interpreted the Twenty-first Amendment as an absolute exception to the Commerce Clause. However, this changed in 1964 with a string of Twenty-first Amendment cases. In Hostetter v. Idlewild Bon Voyage Liquor Corp. (1964), Justice Potter Stewart, writing for the majority, argued forcefully that the Twenty-first Amendment was not an absolute exception to the Commerce Clause as far as liquor was concerned. Likewise, in Department of Revenue v. James B. Beam Distilling Co. (1964), the Court held that Kentucky’s tax on imported whiskey violated the Import-Export Clause. Justice Stewart, again writing for the majority, stated:

To sustain the tax which Kentucky has imposed in this case would require nothing short of squarely holding that the Twenty-first Amendment has completely repealed the Export-Import Clause so far as intoxicants are concerned. Nothing in the language of the Amendment nor in its history leads to such an extraordinary conclusion. This Court has never intimated such a view, and now that the claim for the first time is squarely presented, we expressly reject it.

Similarly, in (1971), the Court held that a Wisconsin statute that empowered a police chief to post in all local retail liquor outlets a notice forbidding the sale of alcohol to the plaintiff because of his excessive drinking, without giving the plaintiff any advance notice or opportunity to contest it, violated the due process requirements of the Fourteenth Amendment.

Throughout the 1970s and early 1980s, the Supreme Court continued to chip away at the Twenty-first Amendment. See, e.g., United States v. Tax Commission of Mississippi (1975) (holding that the states could not tax the sale of liquor on military bases within their borders because the United States has concurrent jurisdiction over military bases); Craig v. Boren (1976) (noting that the Twenty-first Amendment does not override the equal-protection requirements of the Fourteenth Amendment); California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc. (1980) (finding that the Twenty-first Amendment does not protect a state regulation that violates the Sherman Act because of the Supremacy Clause); Larkin v. Grendel’s Den, Inc. (1982) (stating that the state may not exercise its powers under the Twenty-first Amendment in a way that impinges on the rights protected under the Establishment Clause). In New York State Liquor Authority v. Bellanca (1981), the Court allowed a state a greater range of freedom to regulate adult speech in connection with its power to regulate the sale of liquor within its boundaries, because “[w]hatever artistic or communicative value may attach to topless dancing is overcome by the State’s exercise of its broad power under the Twenty-first Amendment”). But in 44 Liquormart, Inc. v. Rhode Island (1996), the Court held that Rhode Island’s prohibition against certain advertisements stating the prices of liquor was an abridgment of the First Amendment’s protection of free speech. Although the lengthy decision contained several concurring opinions, all nine justices agreed that the Rhode Island law was not saved by the Twenty-first Amendment. For the majority, Justice John Paul Stevens stated, “[W]e now hold that the Twenty-First Amendment does not qualify the constitutional prohibition against laws abridging the freedom of speech embodied in the First Amendment.”

In Capital Cities Cable, Inc. v. Crisp (1984), the Court finally articulated a balancing test to determine when the state’s powers under the Twenty-first Amendment trump the Commerce Clause:

In such a case, the central question is whether the interests implicated by a state regulation are so closely related to the powers reserved by the Amendment that the regulation may prevail, even though its requirements directly conflict with express federal policies.

Applying this balancing test in Bacchus Imports, Ltd. v. Dias (1984), the Court struck down a Hawaiian tax law that favored certain liquors that were only manufactured locally because “[s]tate laws that constitute mere economic protectionism are . . . not entitled to the same deference as laws enacted to combat the perceived evils of an unrestricted traffic in liquor.”

In 324 Liquor Corp. v. Duffy (1987), the Court balanced the state’s virtually complete control over the liquor distribution system within its borders against the policy behind the Sherman Antitrust Act and found the latter of more weight. In a sharp dissent, Justice Sandra Day O’Connor, joined by Chief Justice William H. Rehnquist, rejected the majority’s conclusion. The dissent described in detail the legislative history and the subsequent state practices to show that the amendment was designed to give the states absolute control over the manufacturing and distribution of liquor within their borders. The “Senate discussions,” she wrote, “clearly demonstrate an intent to confer on States complete and exclusive control over the commerce of liquor.” The states understood the meaning as well. Immediately after the ratification of the Twenty-first Amendment, states enacted strong price-control measures, “the very type of statute that this Court strikes down today.” The majority opinion answered Justice O’Connor’s argument with a one-paragraph footnote that focused on maintaining federal economic power through the Commerce Clause and the Antitrust Laws.

That same year in South Dakota v. Dole (1987), the Court held that Congress could use its spending power to regulate interstate commerce indirectly with regard to intoxicating liquors. In Dole, Congress made certain highway funding contingent upon a state’s acceptance of a minimum drinking age of twenty-one years. Justice O’Connor and Justice William J. Brennan Jr. each filed dissents, with Brennan arguing that the Twenty-first Amendment limited the spending power.

The Supreme Court last addressed the Twenty-first Amendment in the case Granholm v. Heald (2005). The Court reiterated its prior holdings that the Twenty-first Amendment does not protect state laws that violate the First Amendment’s Free Speech Clause, the Establishment Clause, the Equal Protection Clause, the Due Process Clause, and the Import-Export Clause. The Court also reaffirmed its decision in Bacchus that “forecloses any contention that § 2 of the Twenty-first Amendment immunizes discriminatory direct-shipment laws from Commerce Clause scrutiny.” Justice Clarence Thomas wrote a detailed dissent, arguing that the text and history of the Twenty-first Amendment make clear that there is no “negative Commerce Clause barrier to state regulation of liquor sales to in-state consumers.”

After a number of years in which the Supreme Court pruned state powers under the Twenty-first Amendment, the amendment now leaves a state with the power to become dry if it chooses and to control to some extent the distribution and sales system of alcohol within its borders. The three-tier system remains intact in many states, and Granholm affirmed its legitimacy. But lower courts have divided on the extent to which state licensing requirements among the tiers can constitutionally restrict interstate trade in liquor and wine.