Till now, a lot of states have treated participants inside their legal cannabis industries as second-class citizens, depriving these corporations of specific constitutional protections that apply in any other marketplace. Standard wisdom stated that cannabis corporations have been either so grateful to be operating in the light of day, in a legal marketplace, that they would take these abuses without the need of a fight, or that they have been also stoned to know or care what to do about it. It turns out the standard wisdom was incorrect mainly because, now, we are at a pivotal moment exactly where the complete landscape appears poised to alter. Let me clarify.
The most apparent instance of states overstepping when it comes to cannabis regulations are the residency needs popping up about the nation. By residency needs, I imply these laws that exclude non-residents from completely participating in a state’s cannabis industry. It is black letter law, as we lawyers like to contact issues that are apparent and incontrovertible, that residency needs are not permitted in ‘normal’ industries mainly because the dormant Commerce Clause of the federal Constitution prohibits such protectionism. As lately as final year, for instance, the U.S. Supreme Court struck down a Tennessee law that restricted Tennessee liquor licenses to these who had been residents of the state for at least two years. This selection, known as Tennessee Wine & Spirits Retailers Ass’n v. Thomas, created it really clear that state laws are unconstitutional if their “predominant effect” is “simply to protect” citizens of that state “from out-of-state competitors.”
Residency needs in the cannabis business are clearly intended to safeguard residents from out-of-state competitors and, below the regular evaluation, are unconstitutional. But they are widespread and commonplace. A couple of examples include things like Oklahoma which prohibits non-residents from owning additional than 25 % of a licensed health-related marijuana company Washington which has a six-month residency requirement for its adult use system and Portland, Maine (close to property, for me) which lately established licensing criteria that favors Maine residents more than other folks.
There’s no fantastic explanation for the widespread disregard for the Constitution in cannabis regulation, except maybe that a lot of state and neighborhood regulators have assumed that the Controlled Substances Act and its federal prohibition on cannabis somehow immunizes the business from the usual constitutional safeguards. Certainly, a lot of a commentator has shared this view that the Constitution, or at least components of the Constitution such as the dormant Commerce Clause, do not apply to state-legal cannabis markets. There are a lot of troubles with this viewpoint, beginning with the reality that, at least in specific contexts, its definitely incorrect. A state could not exclude persons of a specific race, religion or nationality from owning cannabis corporations, for instance. Nor could a state revoke someone’s correct to free of charge speech merely mainly because that particular person was a health-related cannabis patient or caregiver. These constitutional safeguards clearly stay intact, unbothered by the Controlled Substances Act .
As soon as we establish that the Constitution applies in all the apparent techniques (free of charge speech, equal protection of the laws, and so forth.) to the cannabis business, we have to query the standard wisdom that regulators can take specific liberties with cannabis, like residency needs, that the Constitution would generally prohibit. This reality is that this business is not so distinctive than a lot of other very regulated trades. Federal illegality is the apparent distinction, but there’s no nicely-established or even nicely-articulated cause that the nominal federal prohibition on cannabis would strip the business of its constitutional rights.
But there’s an additional cause, beyond the academics of no matter if and when the Constitution applies, that regulators have been so bold when it comes to cannabis. The business, till lately, hasn’t truly fought back and constitutional rights only matter when they’re enforced. Regulators, maybe not illogically, have regulated state-legal cannabis markets nonetheless they want, Constitutional issues aside, mainly because no 1 has meaningfully challenged these laws. Lately, that has changed.
Sticking with the instance of residency needs, cannabis operators are fighting back in a major way. This year lawsuits have been filed against the State of Maine, the City of Portland, Maine, the State of Oklahoma, and the State of Washington, all difficult 1 sort of residency requirement or an additional. (Disclaimer right here: I have been involved as a lawyer for plaintiffs in 3 of these lawsuits against Maine, Portland and Oklahoma.) The lawsuit against the State of Maine ended rapidly just after Maine decided that, rather than litigating, it would quit enforcing the state’s two-year residency requirement for its adult use industry. This was on the guidance of the state’s Lawyer Common that the residency requirement was “subject to important constitutional challenges and is not probably to withstand such challenges.”
What will the sensible impact of these lawsuits be on the business as a complete? Of course that depends in element on how they turn out, but my intuition is that, regardless, regulators will start to assume twice when crafting cannabis laws in their jurisdictions. As the business shows that it is prepared and prepared to stick up for itself, and not afraid to ask the courts for support as required, lawmakers will take a additional thoughtful strategy, balancing the rights of the business against the other significant policy ambitions in just about every state-legal industry.
This post has focused on residency needs, largely mainly because that is exactly where the action is at the moment. But the business is starting to challenge other sorts of state regulations additional usually, and additional effectively as nicely, such as laws that favor specific classes of corporations or company-owners more than other folks, and laws that are overly restrictive of marketing or advocacy by cannabis operators. The similar logic applies regardless of the precise legal correct or Constitutional protection we’re speaking about – an business that is additional prepared to invoke these rights and protections is going to be treated additional relatively by lawmakers.
The sensible takeaway right here, I hope, is that cannabis operators ought to not be afraid to invoke federal law and the federal Constitution when proper, to make sure they are getting treated legally and relatively. As the business trends toward broader legalization, this is a important step along the way.