As I said there in the comments (Chuck's always-excellent blog), Diageo argued the matter well in its complaint. However, the state may have a trump: the nature of whiskey-making, in which distillation is just a first step. For products like whiskey which require maturation (not just the more neutral-sounding "storage" in the well-worded language of the complaint), the product isn't finished until the aging is finished. And so, if you can license distillers, why should you not require aging in the jurisdiction, so you can monitor what is being made? Let's say the stuff is trucked over to a place where the air is heavily polluted, or something is added to the barrels. The state of licensing naturally has an interest to monitor the product until it is ready for sale; and it might pull the license or warn the license-holder if it is not satisfied the licensee is exercising its privilege properly. But it can't do that, or as well, when the product is being aged in another state. So if I was Tennessee, I'd argue this in addition to the apparent 21st Amendment arguments Chuck adverted to in his informative article.