The suit, which was filed in U.S. District Court in Maryland, is the third such lawsuit against Trump, arguing that the president is violating key parts of the Constitution created to ensure that the country's leader is not beholden to foreign interests.
The attorneys general feel confident that they have the standing to sue because Maryland and D.C. entered a contract, the Constitution, that Trump has violated by accepting gifts.
"We're concerned that foreign governments are coming to the Trump businesses with a single objective of currying special favor from the president of the United States so that their interest can get a higher priority than the interest of the American people", District of Columbia Attorney General Karl Racine said at a news conference announcing the lawsuit.
A similar suit over foreign emoluments was filed in January by an ethics group known as CREW, for Citizens for Responsibility and Ethics, and it was later joined by a restaurant and some private hotels.
Real estate billionaire Donald Trump has said in the past that he would transfer the management of his business in the hands of his sons, and that nobody cares about his taxes.
The Republican National Committee has called the new lawsuit "absurd", and they accused the attorney generals of being "partisan".
The Justice Department has urged a federal judge to throw out CREW's suit on the grounds its plaintiffs do not have standing. You know, the Emoluments Clause has never been applied - at least in the modern world, and I just think this is - this is a political attempt to interfere and damage the presidency.
"If the Justice Department is right, the emoluments clause has no meaning whatsoever", Frosh said.More news: John Avildsen, director of Rocky and The Karate Kid, dies aged 81
The attorney generals argue that the constitutional clause that deals with this issue intends to limit the potential for corrupting influences from foreign governments.
The Trump Organization also owns more than a dozen more golf clubs globally, including properties in Florida, California, Pennsylvania, Virginia and New Jersey. And presidents may not accept anything more than their salaries from either the federal or state governments.
The White House did not immediately respond to requests for comment.
"By not divesting himself from his businesses", Trump is flouting the constitutional protections against corruption, Racine argued.
While Frosh and Racine note several instances of foreign diplomats staying at the Trump hotel - and that the Kuwaiti Embassy appears to have moved an event to the hotel from another Washington venue - it does not cite an example of a guest pulling out of a Maryland hotel to stay at the Trump property.
Newly filed lobbying disclosures show the Saudi government recently spent about $270,000 at the Trump International Hotel in Washington as part of a larger lobbying campaign to ease a USA terrorism law.
The foreign emoluments clause prohibits the president and other government employees from accepting foreign gifts and payments without congressional approval.
"The President's conflicts of interest threaten our democracy", said Frosh. He refused to release them even though all previous presidents had done so during their run for the presidency since about the 1960s.