By a 7-2 vote, the court said that a 15-year sentence given to Derrick Kimbrough, a black veteran of the 1991 war with Iraq, was acceptable, even though federal sentencing guidelines called for Kimbrough to receive 19 to 22 years.
In a separate sentencing case that did not involve crack cocaine, the court also ruled in favor of judicial discretion to impose more lenient sentences than federal guidelines recommend.
In a pair of cases involving drug crimes, trial court judges had handed down sentences that were shorter than those called for in the federal sentencing guidelines established by the U.S. Sentencing Commission.
This ruling is important because federal sentencing guidelines require much more jail time for small amounts of crack cocaine than for powdered cocaine, which in turns leads to a big racial disparity, since crack is more common among African-Americans, powder among whites, and it's the same drug, reports CBS News correspondent Bob Fuss.
Many federal judges think this is patently unfair, and the Supreme Court says now they can give shorter sentences for crack possession if they want.
At arguments in October, Justice Stephen Breyer asked whether there was a way for the court to find a path between forcing judges to adhere to the guidelines in all cases "and the opposite, which is to say they don't have to do anything the commission says."
One case involved a crack cocaine dealer who received a 15-year term when the guidelines called for 19 to 22 years in prison.
The law includes what critics have called a 100-to-1 disparity: Trafficking in 5 grams of crack cocaine carries a mandatory five-year prison sentence, but it takes 500 grams of cocaine powder to warrant the same sentence.
That difference has made it a racial issue, reports CBS News correspondent Wyatt Andrews. Because most crack dealers are black, African Americans tend to think the law was written to put black men away.
And that's not just the view from the streets, adds Andrews. Federal judges, including Reggie Walton, have asked Congress to change the 100-1 rule, arguing it undermines confidence in the system.
"From the standpoint of fundamental fairness, I think it is imperative that this 100 to one disparity be addressed," said Walton.
When U.S. District Judge Raymond A. Jackson sentenced Kimbrough to 15 years for selling crack and powder cocaine, he called the higher range "ridiculous." Kimbrough, who is black, is a veteran of the 1991 war with Iraq.
A federal appeals court threw out the lighter sentence, but Kimbrough's lawyer defended it to the justices.
"Judge Jackson got it right in this case," said Michael Nachmanoff, the Federal Public Defender in Alexandria, Va. "He imposed a long sentence of 15 years."
Arguing for the longer sentence - 19 to 22 years - Justice Department lawyer Michael Dreeben said judges must impose sentences that apply the 100-to-1 ratios. "For a judge to say I think Congress and the guidelines are crazy is a textbook example of an unreasonable sentencing factor," said Dreeben, a deputy solicitor general.
A companion case from Iowa also involves a judge's discretion to impose a more lenient sentence in a drug case, although Brian Gall pleaded guilty to conspiracy to distribute ecstasy. In Gall's case, the judge decided probation was sufficient punishment even though the guidelines called for prison time.
A federal appeals court threw out that sentence as well.
The Bush administration had supported the appeals court rulings, while civil rights and advocacy groups were backing the defendants.
Congressional opponents of the laws establishing more severe sentencing for crack cocaine than powdered cocaine say they are racially discriminatory because they hit more directly at the black community, where this form of drug abuse is more commonplace.
Advocates for reducing the disparity point to crime statistics that show crack is more of an urban and minority drug while cocaine powder is used more often by the affluent. They say harsher penalties for crack cocaine unfairly punish blacks.
More than four-fifths of crack cocaine offenders in federal courts last year were black, according to the U.S. Sentencing Commission. By contrast, just over a quarter of those convicted of powder cocaine crimes last year were black, the commission said.
Kimbrough actually had much more powder than crack, but it was the latter that determined the length of his prison term.
The 4th U.S. Circuit Court of Appeals in Richmond said judges are not free to impose sentences shorter than the guidelines "based on a disagreement with the sentencing disparity for crack and powder cocaine offenses."
The crack-powder disparity grew out of a 1986 law that was passed in response to violent crimes committed to get money to feed crack habits.
The sentencing commission, an independent agency within the U.S. judiciary, voted in May to reduce the recommended sentencing ranges for people convicted of crack possession, a step toward lessening the disparity. The recommendation will become effective Nov. 1 unless Congress acts.