The case that resolved an important question of the power and jurisdiction of federal courts was Cohens v. Virginia (1821), a case involving the selling of lottery tickets. Jacob Cohen started Cohen’s Lottery and Exchange Office of Baltimore and brothers Philip and Mendes Cohen managed the Norfolk branch. The Cohen brothers sold national lottery tickets, an activity approved by the federal government and administered by officials from the District of Columbia.

The problem was that the state of Virginia wanted to promote its own lottery. The state passed a law in 1820 that prohibited the sale of out-of-state lottery tickets. State officials charged the Cohens with violating this law because they were selling District of Columbia lottery tickets. While the Cohens were only fined $100, the case was important to them because it affected the vitality of their business. The case is important historically because it involved an important question of federal judicial power.

Convicted in a local state court, the Cohens appealed to the U.S. Supreme Court, contending that the national lottery was a federal institution that the states could not regulate. The state of Virginia argued that the U.S. Supreme Court did not have jurisdiction to hear an appeal in this state court conviction under a state law. The state of Virginia also argued that the Supreme Court could not hear the case because of the Eleventh Amendment, which generally provides for state immunity from lawsuits by private individuals. Chief Justice John Marshall’s opinion established the supremacy of the federal judiciary. He ruled that the Eleventh Amendment had no application and that Section 25 of the Judiciary Act of 1789 gave the U.S. Supreme Court the jurisdiction to review state laws alleged to be repugnant to the U.S. Constitution.