In the 1917 case of Missouri, Kansas & Texas Railway Company of Texas et al. v. State of Texas, the U.S Supreme Court ruled in favor of the state's right to regulate railway rates within its borders. The dispute arose when several railway companies challenged a law passed by the Texas legislature that set maximum freight and passenger rates for rail transport within the state. They argued that this violated their rights under both federal commerce laws and constitutional protections against confiscation without due process or just compensation. However, after examining evidence presented about operating costs and profit margins, Justice Day delivered an opinion on behalf of a unanimous court upholding these regulations as reasonable exercises of state power to protect public interests from excessive charges by monopolistic industries.

In the dissenting opinion for Missouri, Kansas & Texas Railway Company of Texas et al. v. State of Texas, Justice Oliver Wendell Holmes Jr., argued that the state's regulation on railway rates was not an unconstitutional interference with interstate commerce. He contended that states should have the right to regulate businesses within their borders and protect their citizens from excessive charges by corporations operating in multiple states. The majority ruling held that such regulations could interfere with interstate trade and were therefore unconstitutional under the Commerce Clause of the U.S Constitution; however, Holmes believed this interpretation was too broad and infringed upon state rights to self-governance.