As Rusty said the live bait regulations are to stop invasive fish entering a water system. For example, a guy goes and catches his own bait fish from a local river. He then takes the live bait to an other system and fishes with them. At the end of his fishing day he has left over bait so he dumps the remainder in the water. Now that system has bait fish thay may not have been there before. Using a dead herring or something from a grocery store elimnates that as the bait isn't going to magicaly come back alive and invade the body of water. However maybe there are other reasons? Bacterias from the dead fish? Its a good question!