In the case of Dawson, Attorney General of the State of Kentucky, et al. v. Kentucky Distilleries & Warehouse Company in 1920, the Supreme Court was asked to determine whether a state law requiring distillers to sell their products only through licensed wholesalers violated the Commerce Clause and Due Process Clause of the U.S Constitution. The court ruled that it did not violate either clause as long as there were no discriminatory practices against out-of-state businesses or unreasonable restrictions on trade. This decision affirmed states' rights to regulate alcohol under their police powers for public health and safety reasons without interfering with interstate commerce unless such regulations are arbitrary or discriminatory.

In the dissenting opinion for Dawson, Attorney General of the State of Kentucky, et al. v. Kentucky Distilleries & Warehouse Company (1920), Justice Holmes argued that the state's right to regulate alcohol did not extend to outright prohibition without compensation. He believed that such a move was an overreach of government power and violated property rights protected by due process under the Fourteenth Amendment. Holmes contended that while states could regulate or limit certain uses of property in order to protect public health or safety, they could not completely prohibit its use without providing just compensation for loss suffered by owners as a result. This case marked one instance where he disagreed with his colleagues' interpretation and application of constitutional law regarding states' police powers versus individual property rights.