World War I Nerd - I have not seen any regulations specific to buttons. I just assumed that all Federal insignia of any kind (including buttons) was unauthorized for Home Guard units. Since most HG units were equipped from supplies in local National Guard Armories, their uniforms often had state seal buttons. Most larger communities purchased buttons and insignia specific to their unit. The idea was to separate HG and State Guard units from any affiliation with Federal or State Government to prevent their being called into Federal service. Again, the primary function of these guard units was more to support the police in times of emergencies, as the Nation Guard had done. In 1919 only a couple of states had State Police. Local police departments depended on the National Guard for support when needed. The federalization of National Guard units left the police without backup. That is why these guard units were created.
I think the CO above the crossed rifles is most likely Colorado.