The U.S. Supreme Court case State of Wyoming v. State of Colorado in 1921 revolved around a dispute over water rights between the two states, specifically involving the Laramie River which flows from Colorado into Wyoming. The state of Wyoming sued Colorado to prevent it from diverting water upstream for irrigation purposes, arguing that this would significantly reduce the amount available downstream in Wyoming and harm its agricultural interests. The court ruled in favor of Wyoming by applying the doctrine of prior appropriation - "first in time, first in right" - which holds that whoever begins using a resource first has superior rights to it than those who begin using it later. This decision set an important precedent for interstate disputes over shared resources.

In the dissenting opinion for State of Wyoming v. State of Colorado, Justice Holmes argued that the Supreme Court should not have jurisdiction over this case as it was essentially a dispute about property rights and water usage between private parties in different states, rather than between the states themselves. He contended that while both states had an interest in how their citizens used water resources, they did not own these resources outright and therefore could not bring suit against each other on behalf of their residents. Furthermore, he suggested that even if such suits were permissible under federal law, they would be better handled by lower courts with more expertise in local conditions and laws governing water use. Finally, he expressed concern about setting a precedent where any disagreement involving natural resources could potentially escalate into a full-blown interstate legal battle.