It seems absurd that the DOJ is using the FCC's argument that it didn't have the authority to regulate ISPs to prevent states from regulating ISPs. If they don't have the authority to regulate, how do they have the authority to stop regulation?

I think the answer is pretty obviously not some kind of reasonable legal argument, but simply that the corporations which really run the Trump FCC and DOJ do not want Net Neutrality regulations. Comcast's bottom line doesn't care about rational legal arguments.