In the case of Missouri Pacific Railway Company v. State of Nebraska, 1909, the U.S Supreme Court ruled in favor of the railway company. The state had imposed a tax on all railroad companies operating within its borders based on their gross earnings from both interstate and intrastate commerce. The railway company argued that this was unconstitutional as it interfered with interstate commerce which is under federal jurisdiction according to the Commerce Clause in Article I Section 8 of the Constitution. The court agreed with this argument stating that while states have power to tax businesses operating within their boundaries, they cannot interfere or burden interstate commerce through taxation or regulation as it falls under exclusive federal control.

In the dissenting opinion for Missouri Pacific Railway Company v. State of Nebraska, Justice Holmes disagreed with the majority's decision to strike down a Nebraska law that regulated railroad rates. He argued that states should have the authority to regulate businesses within their borders as long as they do not interfere with interstate commerce or violate constitutional rights. He believed that it was inappropriate for courts to intervene in economic matters and substitute their judgment for that of legislatures unless there is clear evidence of unconstitutionality. Furthermore, he contended that railroads are public utilities subject to government regulation due to their monopoly power and importance in society. Therefore, he concluded, state laws regulating railroad rates were both necessary and constitutionally permissible.