This article assesses three approaches to state regulation: capture theory, interest group analyses, and neoinstitutional research. State‐level event history analyses of fire insurance rate regulation from 1906 to 1930 are used. Contrary to capture theory, regulation was not driven simply by firms’ interests in market control. Instead, consistent with interest group analyses, regulation was more likely when anticompany forces—farmers and small businesses—could challenge big business politically. Further, as neoinstitutional research suggests, regulation was more likely when industry governance evoked legitimacy crises, when courts and professions endorsed regulation and its underlying models, and when states developed system‐wide administrative capacities. Institutional conditions also mediated the effects of markets and politics on regulation. Using these findings, we develop a theory of how political and institutional conditions shape industries’ governance options.