Preparing his inaugural address, Buchanan faced a serious dilemma. His platform had endorsed popular sovereignty but had conveniently left unspecified the point at which the decision on slavery would be made. Southerners insisted that the matter could be decided only at the point of statehood, after slavery had had at least a chance and when a rejection could be attributed to climate, geography, or other impersonal forces. Northerners, including Douglas, would have the decision made by the territorial constitution before any significant number of slaves could arrive and before the accompanying racial prejudice could work to preserve even a minimal development of the institution. A rejection at this point would deny slavery any chance at all and could be based only on moral grounds insulting to proud southern sensibilities.

Buchanan shared the southern view, but saw an opportunity to shift the decision to a case pending before the Supreme Court. A slave, Dred Scott, had sued for freedom in Missouri on the grounds that he had lived with his late owner, an army officer, for several years in Illinois and Wisconsin, areas free under the Missouri Compromise. By the time the case worked its way through the lower courts, the officer's widow had married an abolitionist. Scott's freedom was assured, but all concerned insisted upon a judicial ruling against Scott for the sake of principle and politics. In response to Buchanan's inquiry, Justice John Catron had informed the president-elect that the five southern justices would probably allow the Missouri court's ruling to stand and would avoid a broad pro-southern statement of principle limited only to themselves. Catron also suggested, however, that if Justice Robert Grier of Pennsylvania would support their position, the southerners might change their minds and deal with the general questions related to territorial slavery. Quite improperly, Buchanan wrote Grier a strong request that he join the southerners. In his inaugural address, Buchanan announced that the Court would soon settle the issue of territorial slavery and predicted that sectional peace would result.

On 6 March 1857 the Court announced two basic principles: First, no Negro could be a citizen, and Scott's suit was therefore invalid. Second, slaves were property protected by the Constitution in all territories; therefore, neither the federal government nor any territorial government could bar slavery from any territory, and the Missouri Compromise therefore had always been unconstitutional. This direct application of the Constitution to territories contradicted all past and future rulings (which granted Congress arbitrary authority over territories) and caused an uproar in the North. In northern eyes, the Supreme Court, in collusion with the president, had destroyed all legal barriers to western slavery and had prepared the way for a complete southern conquest of the region. Nothing could have helped the Free-Soil Republican party more.