Maine ends residency requirements for cannabis business owners

Many states have residency requirements to own or potentially even invest in a state licensed cannabis company. One of these states, until recently, was Maine.

High Street Capital Partners is a Delaware based cannabis company that wanted to purchase Northeast Patient Group’s three medical marijuana dispensaries. Northeast is owned by Maine residents; High Street is owned by non-residents. Together, they sued Maine’s Department of Administrative and Financial Services in 2020 under the Dormant Commerce Clause (DCC). The state and a group of cannabis business owners appealed the initial ruling in favor of Northeast Patient Group and failed.

A federal appeals court struck down Maine’s residency requirement for cannabis business owners last week. The First Circuit Court of Appeals agreed with a lower court’s ruling that Maine’s cannabis residency requirement violated the DCC of the US Constitution. The DCC prohibits “states passing legislation that discriminates against or excessively burdens interstate commerce”. The ruling could have far-reaching implications outside of Maine.

Dormant Commerce Clause and Cannabis

The DCC has been successfully uses in striking down similar cannabis residency requirements in several other states. In Michigan, a similar measure favoring Detroit residents was found unconstitutional. In Colorado, a federal court ruled the State’s residency requirement for cannabis business owners to be unconstitutional. This pattern has repeated itself in several other States, leading one to believe that the days of residency requirements are numbered. However, many states still have residency requirements on the books.

There are two reasons for this. The first is that these cases have only been specific to each state, so many states are able to keep their residency requirements on the books until someone is willing to spend years of time, and tens of thousands of dollars, suing to overturn the rule. Second, and perhaps more importantly, is that States have in some cases successfully defended their requirements using “clean hands” doctrine. The Federal Court for the Western District of Oklahoma, for instance, just refused to overturn that State’s residency requirement by saying that it “won’t use its equitable power to facilitate illegal conduct.”[1]

Many legal experts feel that the Western Districts reasoning in that case was fairly flawed, which is why that Court remains in the minority of Courts when the question of the Constitutionality of State cannabis license residency requirements. Still, it is worth noting that there is a jurisdiction split at the Federal level, so any single cases outcome is far from assured.

How This Could Affect Cannabis Interstate Commerce

There may be further ramifications from these cases. The DCC ruling in Maine is raising questions regarding the interstate sale of cannabis. Professor Robert Mikos of Vanderbilt University Law School told Marijuana Moment, “I see no way to distinguish licensing preferences from those bans on imports and exports. I think they’re equally vulnerable.” Still, there is reason to be cautious. As some cannabis-legal states are pushing for interstate cannabis commerce through the courts, Congress is having difficulty legalizing cannabis federally.

[1] Original Investments v. Oklahoma (W.D. Okla. June 4, 2021)

To learn more about Maine cannabis regulations and residency requirements in other states, contact a Global Go consultant today.

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