In 2011, the Sons of Confederate Veterans wanted to offer a specialty license plate honoring their ancestors that featured the rebel flag.
But the Department of Motor Vehicles said "no thanks." So they sued them.
U.S. District Judge Sam Sparks ultimately ruled against the plates last week.
"Well we're certainly disappointed, We're certainly shocked. There are eight other states in the former Confederate States of America that did have to sue the government to get to put the Sons of Confederate Veterans specialty plates on their license plates and...every one of those eight states, the Sons of Confederate Veterans prevailed," said Marshall Davis with the Texas Division of Sons of Confederate Veterans.
Davis says the reason the DMV denied their plate in the first place is because it might be seen as offensive.
Davis says the rebel flag was a soldier's flag and they condemn any misuse of it that makes it a symbol of racism.
"We have African American members who are descendent of black Confederate soldiers in our organization who are proud to be members and we are proud to have them. Our organization is all about the heritage and to preserve the true history of the South," Davis said.
FOX 7 asked Austinites if they think not allowing the plates is a violation of the First Amendment...free speech.
"I don't really get bogged down in those types of questions because I don't think that you have a right to oppress someone and I don't think that it oppresses you to have your ability to oppress other people taken away," said Teri Adams.
"Yeah, yeah I do. I know it's a flag and it means certain things but if they're using it as a viewpoint of like...their ancestors were in war, in this major, major war that changed America forever then you know...that's pretty powerful," said Kevin Johnson.
On our Facebook page, Shon writes: "States can choose what to and what not to offer for their plates so it's not a violation. If you really want a Confederate flag on your vehicle so badly then go buy a bumper sticker."
Tiffany writes "It does violate free speech. Some people associate it with hate and racism which is not the true meaning of it. Read some history books. People have changed the meaning of it. Just like the swastika symbol used to represent peace until Hitler changed that."
Davis says they are still talking with their attorneys about their next move. But if they go forward, he says they'll take it to the Fifth Circuit Court of Appeals.