A more thorough explanation:

Actual controversy is a requirement for courts to issue a declaratory judgment. This means that there must be a real dispute between parties that have opposing legal interests. The requirement comes from the Declaratory Judgment Act, which allows federal courts to issue declaratory judgments only in the case of an "actual controversy." This is because the U.S. Constitution only allows the judiciary to adjudicate "cases" and "controversies."

The U.S. Supreme Court has established a test for determining whether an actual controversy exists. The test looks at the facts alleged and considers whether there is a substantial controversy between parties with adverse legal interests that is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

One example of an actual controversy is a liability insurer's complaint for a declaratory judgment that it is not liable on the policy nor obligated to defend an automobile collision case pending in the state court against the insured. In Maryland Casualty Co. v. Pacific Coal & Oil Co., the U.S. Supreme Court found that this case presented an actual controversy, not only with the insured, but also with the injured person.

On the other hand, in Preiser v. Newkirk, the U.S. Supreme Court found that there was no actual controversy where a prisoner sought judgment to be returned to a medium-security prisoner after being transferred to a maximum-security prisoner because he had already been returned by the time the case reached the Supreme Court, making the case moot.

These examples illustrate that an actual controversy must exist for a court to issue a declaratory judgment. In the first example, there was a real dispute between parties with opposing legal interests that required resolution. In the second example, the dispute was no longer real because the prisoner had already been returned to the medium-security prison, making the case moot.