In 1808, the New York legislature granted Robert Fulton and Robert Livingston an exclusive monopoly to operate steamboats in New York waters. Aaron Ogden obtained a license from this monopoly to operate steamboats between New York City and Elizabethtown, New Jersey. Thomas Gibbons operated competing steamboats on the same route under a federal license obtained pursuant to the Federal Licensing Act of 1793.

Ogden sued Gibbons in New York state court to enforce the state monopoly and prevent Gibbons from operating in New York waters. The New York Court of Chancery granted an injunction in favor of Ogden, and the New York Court of Errors affirmed, holding that the state had authority to grant the exclusive monopoly and that federal licensing did not preempt state regulation.

Gibbons appealed to the U.S. Supreme Court, arguing that his federal license gave him the right to operate in interstate commerce and that the New York monopoly violated the Commerce Clause by interfering with congressional power to regulate interstate commerce.

The Commerce Clause grants Congress broad power to regulate interstate commerce, which includes navigation and transportation between states. "Commerce" encompasses not just buying and selling, but all commercial intercourse, including navigation.

When federal and state laws conflict in areas of interstate commerce, federal law is supreme under the Supremacy Clause. States cannot interfere with or obstruct the legitimate exercise of congressional power over interstate commerce.

Broad Definition of Commerce: Chief Justice Marshall defined "commerce" broadly to include not just buying and selling, but all commercial intercourse between states, including navigation and transportation. This expansive interpretation established the foundation for extensive federal regulatory power.

Federal Supremacy: The Court held that when Congress exercises its constitutional power over interstate commerce, federal law supersedes conflicting state law. The Supremacy Clause requires that valid federal legislation preempt inconsistent state regulations.

Interstate vs. Intrastate Commerce: The Court distinguished between interstate commerce (subject to federal regulation) and purely internal state commerce (subject to state regulation). Steamboat navigation between New York and New Jersey clearly constituted interstate commerce.

Federal Licensing Authority: Congress's power to regulate interstate commerce includes the authority to license vessels engaged in such commerce. Gibbons's federal license gave him the right to engage in interstate navigation despite the state monopoly.

The Court emphasized that the Commerce Clause was intended to create a national market free from state interference and to prevent the economic balkanization that had plagued the country under the Articles of Confederation.

This case established the foundational principles of Commerce Clause jurisprudence that continue to shape federal-state relations today. Marshall's broad interpretation of "commerce" provided the constitutional basis for extensive federal regulation of economic activity.

The decision promoted national economic integration by preventing states from creating barriers to interstate trade and commerce. It established the principle that the United States should function as a single, unified market rather than a collection of separate state economies.

The case demonstrated the Supreme Court's role in interpreting the Constitution to strengthen federal power and national unity. It remains one of the most important precedents for federal regulatory authority and continues to be cited in modern Commerce Clause cases.