At one time, the Earth Empire ruled the galaxy. Eventually, the Empire grew so large that it became fragmented and consumed by civil war that stretched across the galaxy.
Three distinct factions - the United Earth Federation, the Aeon Illuminate, and the Cybran Nation - emerged from the chaos. Unable to coexist peacefully, they spent the next thousand years fighting for control of the galaxy.
Dubbed the Infinite War, the conflict claimed billions of lives. It only ended when an even greater threat appeared, an invasion by an alien race called the Seraphim. Faced with extinction, the three factions put aside their differences and formed the Colonial Defense Coalition to turn back the alien menace.
After the Seraphim were defeated, the Coalition became the governing body of the galaxy. Its first act was to tear down the Quantum Gate network, the primary method of traveling to and from distant systems. It was a largely symbolic act: by restricting the ability to move armies nearly instantaneously over large distances, it greatly diminished the chances of another intergalactic war. The cost was greater isolation for distant colonies, but most saw this as a perfectly reasonable trade-off.
Because of this isolation, each planet has its own governing body, and each colony has its own governorship. The individual factions remain in name and maintain their own military forces, though they're all bound by one set of ruling law.