Focusing on U.S. federalism debates in the context of climate change and sanctuary jurisdictions, this paper argues that the federal government‘s approach to these inherent transnational concerns represents classic political market failures. Extending John Hart Ely‘s notion of addressing such failures – from Democracy and Distrust – the paper examines a dynamic overlooked by both constitutional law and international law scholars. I explore two political market failures: (1) how minorities can be systematically locked out of the political process (such immigrants quintessentially are) and, by contrast, (2) how influential minorities can externalize the costs of their negative conduct through regulatory capture (such as the fossil fuel sector in the climate context). In such cases, policy making above and below the nation-state is helpful for addressing such failures, as we currently see with state and local policy innovation in the climate and immigration contexts.