In the case of Arkansas Railroad Commission et al. v. Chicago, Rock Island & Pacific Railroad Company in 1926, the U.S Supreme Court ruled that a state cannot force a railroad company to maintain and operate its interstate trains at a loss for intrastate business purposes. The Arkansas Railroad Commission ordered the Chicago, Rock Island & Pacific Railway Company to continue operating two passenger trains daily on an unprofitable route within the state of Arkansas. However, this order was challenged by the railway company as it argued that such enforcement would result in financial losses due to low passenger demand on these routes and thus violate their rights under federal law which protects against confiscation of property without just compensation (Fifth Amendment). The court sided with the railway company stating that while states have power over local trade affairs including transportation services within their borders; they do not possess authority over interstate commerce or compel companies into unprofitable operations solely for intrastate benefits.

In the dissenting opinion for Arkansas Railroad Commission et al. v. Chicago, Rock Island & Pacific Railroad Company, Justice Stone argued that the majority's decision to strike down an Arkansas law regulating intrastate railroad rates was incorrect because it failed to give due deference to state authority in matters of local concern. He contended that while federal regulation of interstate commerce is necessary and proper, states should retain control over purely internal affairs unless there is a clear conflict with national policy or interests. In this case, he saw no such conflict; rather, he believed the Court had overstepped its bounds by substituting its judgment for that of state regulators without sufficient justification. Furthermore, Justice Stone expressed concerns about potential negative impacts on federalism principles and warned against judicial activism undermining democratic processes at the state level.