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The Democratic-Republican Party as an emerging opposition party was incentivized to develop at the state level first before the national level because of the unique combination of American federalism and national electoral systems. Aldrich’s (1995) work on the development of political parties highlights the role of institutions and the collective action problems they produce. This work, however, does not fully consider the role of American federalism in the development of political parties. The unique position of state legislatures to influence, often directly, the selection of national level political officers made them a linchpin institution for those with national policy goals. State legislatures held the power to determine selection mechanisms for the House of Representatives and presidential electors. Further, these institutions directly appointed US Senators and often gave themselves the power to appoint presidential electors. I provide evidence that the Democratic-Republican party developed from the state level, the middle, out using both quantitative evidence and analyses. I also provide qualitative evidence that party operatives understood the centrality of these institutions to their national level policy goals via their power over national level officer selection.