It's literal. There are a number of states that make it outright illegal to collect rain water even if you're doing it to water your own garden during droughts.

Exactly that, a number of US states used to ban it so water utilities, and water rights buyers can make more money.

As of now, I believe the last explicit ban on that was repealed decades ago.

There are still some restrictions, and a good summary here: https://worldwaterreserve.com/rainwater-harvesting/is-it-ill....

When buying property, you may have agreed that you were not acquiring mineral rights, water rights, etc. and you still might have problems even in the absence of a government rule against it. I don't know how legitimate such claims are or how often they're successful, but I know someone who got legal nasty-grams from a land developer for doing it, and the property owner backed off when they saw the papers they had signed again.

I believe they were usually enacted to protect the nearby properties that the runoff went to, not to help water utilities and water rights buyers make more money, and to protect sources for streams and creeks and rivers.

Also, I don't think most of them were bans. I think they usually just limited the extent of it. Some barrels collecting from the downspouts from your roof--fine. Building a huge reservoir filled by rain--not fine.

And they haven't been all repealed. A few states still have restrictions, such as freely allowing collecting anything that falls on the roofs of your buildings as long as the building weren't specifically to collect rainwater but requiring approval for anything else.