Federal Court Strikes Down Maine’s Residency Requirement For Cannabis Business Owners

A law requiring all owners of medical marijuana businesses in Maine to be residents of the state was struck down last week by a federal appeals court, which ruled that the statute is a violation of the U.S. Constitution. The First Circuit Court of Appeals upheld a lower court ruling that the residency requirement is an unconstitutional restriction on interstate trade.

Under the regulations for Maine’s medical marijuana program, all directors or officers of a dispensary licensed to sell medical cannabis must be residents of the state. In 2020, Maine’s largest medical marijuana company, Wellness Connection, filed a suit to challenge the residency requirement on the grounds that it violates the Constitution’s “Dormant Commerce Clause,” which prohibits states from passing legislation that restricts interstate trade.

Residency requirements have been struck down in other states that have legalized marijuana, and Officials in Maine announced in 2020 that the regulation requiring recreational cannabis businesses to be owned by state residents would not be enforced but kept the requirement in place for its medical marijuana program.

The United States District Court for the District of Maine ruled in the Wellness Connection case that the residency requirement violated the Dormant Commerce Clause and was unenforceable. The ruling was appealed by the state and a coalition of medical marijuana businesses, who argued that the Dormant Commerce Clause does not apply due to the illegality of cannabis under federal law. In a 2-1 decision handed down last week, the First Circuit affirmed the lower court’s decision.

The court wrote that despite the federal prohibition of marijuana, Congress has acknowledged the existence of a medicinal cannabis market through the Rohrabacher-Farr Amendment, a provision of appropriations legislation that has barred federal law enforcement agencies to spend resources prosecuting state-legal medical cannabis businesses. By approving the legislation in 2014 and every year since, Congress also acknowledged “that this market may continue to exist in some circumstances free from federal criminal enforcement.”

“Thus, whatever the circumstances may be with respect to other goods that Congress has deemed contraband, this is not a case in which Congress may be understood to have criminalized a national market with no expectation that an interstate market would continue to operate,” the judges wrote in the majority opinion. “Quite the opposite.”

Ruling Could Affect Marijuana Trade Between States

Legal experts believe that the ruling’s rationale could be applied to state laws banning interstate trade of cannabis between states that have legalized marijuana. Such prohibitions might also violate the Dormant Commerce Clause and be ruled unconstitutional.

“I think this is going to be the next shoe to drop,” Robert Mikos, a professor at Vanderbilt University Law School who specializes in federalism and drug policy, told Marijuana Moment on Thursday. “I see no way to distinguish licensing preferences from those bans on imports and exports. I think they’re equally vulnerable.”

Shane Pennington, an attorney for the cannabis law firm Vicente Sederberg, agrees that the ruling has implications for the federal ban on interstate cannabis trade and could prove extraordinarily disruptive for state medical cannabis markets.

Pennington says that the ruling “puts a slew of state laws restricting interstate cannabis trade squarely in the crosshairs of potential future litigation,” Pennington writes in an email. “Most (maybe all) state-legal regimes are premised on statutes that, for example, bar out-of-state sales, prohibit out-of-staters from owning local cannabis businesses, or reserve state licenses under social equity programs to in-staters. The First Circuit’s decision calls the constitutionality of all these state laws (and others) into question.”

Implications For Foreign Cannabis Imports And Exports

In addition to the ruling’s impact on interstate cannabis trade, Pennington says that the decision could also affect federal prohibitions on the importation and exportation of cannabis to and from foreign countries.

“The First Circuit’s decision will make it harder for the U.S. to defend itself against criticisms from the International Narcotics Control Board (the independent enforcement arm of international drug control treaties to which the U.S. is part like the Single Convention on Narcotic Drugs of 1961) that the U.S. has violated its international treaty obligations by permitting states to legalize cannabis for medical and adult use,” he explains. “In response to these criticisms, the U.S. federal government has insisted that it hasn’t violated treaty obligations because federal law still prohibits cannabis use. The U.S.’s critics have never accepted that argument, but the First Circuit’s decision will make it difficult for the State Department even to continue making it with a straight face.”

Pennington notes that the First Circuit acknowledges that Congress has acquiesced to the legalization of medical cannabis by the states through legislation such as the Rohrabacher-Farr Amendment, which protected regulated medical marijuana businesses from interference by federal law enforcement agencies. He adds that Congress has tended to ignore the international implications of U.S. cannabis policy, “but that’s a huge mistake.”

“The U.S. needs to maintain its legitimacy with its treaty partners if it hopes to be taken seriously on international drug control policy going forward,” Pennington writes. “And the organizations and treaty partners that are watching U.S. cannabis policy so closely are the same ones the U.S. must influence in other drug-control contexts like, say, getting Brittney Griner out of Russian prison for medical cannabis possession or convincing the international community to take a hard line against China and Mexico for flooding the U.S. with the hyper-deadly fentanyl-related substances that are killing hundreds of Americans every day.”