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Why do some governments use their legal systems as a tool of counterinsurgency – for example, prosecuting members of insurgent groups in domestic courts for terrorism-related crimes – while other governments prioritize other counterinsurgency strategies? Following the September 11, 2001 terrorist attacks, the United Nations and the United States urged countries to pass domestic laws criminalizing a wide range of terrorism-related activities, as a means of strengthening the global anti-terrorism legal regime. Although it might seem that all governments confronting domestic insurgencies – or the threat of future insurgency – should have been eager to adopt and implement stronger domestic anti-terrorism laws, in fact, not all governments facing the threat of domestic violence adopted or implemented such laws. This paper explores this puzzle, analyzing how and why governments deploy their legal systems – using domestic laws to prosecute individuals for terrorism-related crimes – as part of their efforts to counter domestic insurgencies. The existing literature on government counterinsurgency has focused primarily on violent government counterinsurgency strategies; less is known about other, less violent tools of counterinsurgency. I argue that in deciding whether to pursue terrorism prosecutions, governments weigh the likely responses of both domestic and international constituencies. Governments are more likely to pursue terrorism prosecutions when their rebel opponents draw support from narrow civilian constituencies. In such cases, the government can portray rebel group members as criminals, without risking a loss of support among the wider domestic public. Domestic institutions also shape government decision making. Democratic and partially democratic governments are more likely than non-democratic governments to use law as a tool of counterinsurgency; deploying their legal systems to confront insurgent groups lends greater legitimacy to their counterinsurgency efforts, helping these governments to maintain popular support. This paper examines these arguments using an original data set on the adoption and implementation of domestic laws criminalizing terrorism worldwide from 1945 to 2020.