Can state governments ban federally licensed businesses through premises permits?

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Federal Court to Hear Kedah's Appeal on Lottery Premises Licenses

The Kedah state government is seeking permission from the Federal Court to appeal a decision that would prevent it from prohibiting lotteries within the state through the non-renewal of premises licenses. Lottery operators have been unable to establish physical outlets in Kedah since 2023, despite possessing federal business licenses. The core of the dispute centres on whether the Kedah government overstepped its constitutional authority by interfering with federally regulated activities.
State Authority vs. Federal Regulation

The legal challenge revolves around the division of powers under the Federal Constitution. While the federal government holds legislative authority over "betting and lotteries," state governments are empowered to regulate "local government" matters, which include the issuance of premises licenses. The Court of Appeal previously ruled that the Kedah state government acted unconstitutionally by using its power to regulate premises to effectively ban a federally licensed activity. This ruling suggested that a local authority cannot leverage its licensing power to prohibit an activity that is already sanctioned under a federal license.
The Nature of Kedah's Decision

Court documents indicate that the Kedah government's refusal to renew premises licenses for lottery businesses was not based on any identified defects in the physical premises themselves, such as safety or sanitation issues. Instead, the decision stemmed from a policy disapproval of the lottery activity itself. This blanket refusal, applied across the state, effectively prohibited businesses that held valid federal licenses to operate. The Court of Appeal found this action to be an impediment to the federal government's authority, particularly in relation to pool betting businesses which fall under federal purview.
Dissenting Opinion on State Policy

A dissenting opinion from one of the Court of Appeal judges argued that the non-renewal of business premises licenses falls within the purview of state legislative powers. This perspective suggested that such a decision is a matter of state policy and therefore not subject to judicial review by the courts. The argument posits that the state government's executive authority should not be obstructed by the federal government's exercise of its own authority, implying that the state's policy choice regarding premises licenses should be respected.
Legal Proceedings and Future Appeal

The Kedah state government's attempt to prohibit lotteries in the state was previously thwarted by a Court of Appeal decision on December 12, 2023, which overturned the non-renewal of premises licenses. The state government is now seeking leave from the Federal Court to pursue a further appeal. This upcoming hearing will determine whether the state can proceed with its appeal, ultimately addressing the constitutional question of state versus federal authority in regulating such businesses.

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Can state governments ban federally licensed businesses through premises permits?

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