A brewing Supreme Court fight over cannabis 🧑‍⚖️

COURTS
A Supreme Court fight over cannabis commerce may be brewing

What happened: The federal Ninth Circuit Court of Appeals split with two other circuit courts in ruling that the U.S. Constitution’s dormant commerce clause does not cover cannabis while it remains federally illegal.

The ruling could lead to a Supreme Court review and may eventually lead to interstate cannabis commerce.

What they’re saying: "Although we appreciate that judges on other courts are divided on this question, we see insufficient license in Supreme Court precedent to use the judge-made dormant Commerce Clause to promote a constitutional right to interstate commerce that is unlawful under federal law," wrote Circuit Judge Daniel Bress in a 23-page unanimous decision.

The ruling involved two cases from the West Coast, Peridot Tree WA Inc. v. Washington State Liquor and Cannabis Control Board and Peridot Tree Inc. v. City of Sacramento. In both cases, the plaintiff argued against the validity of residency requirements for cannabis licenses in Washington state and Sacramento, California, respectively.

Zoom out: Both plaintiff companies are owned by attorney Jeff Jensen, who also mounted legal challenges against residency rules in New York, Maryland, and Rhode Island under the dormant commerce clause.

He won his challenge in New York’s Second Circuit Court of Appeals. The Maryland case and Rhode Island still have pending appeals in the Fourth and First Circuit.

"The possibility that Congress might one day legalize marijuana or that marijuana may at some point become reclassified under the CSA provides no basis for the judicial enabling of a marketplace that is presently not supposed to exist as a matter of federal law," wrote Bress.

The Constitutional precedent: The dormant commerce clause (DCC) essentially says that states may not implement protectionist policies for commerce that benefit one state over another. In the case of cannabis, it is not clear if the DCC applies to a market that is technically not legal to operate across state borders. If SCOTUS were to rule that the DCC applies to cannabis, this could potentially lead to interstate commerce for weed.

The First Circuit Court of Appeals, which operates out of New England, ruled in 2022 that the DCC does apply to cannabis in Northeast Patients Group v. United Cannabis Patients. In that case the court explained that while cannabis cannot legally cross state borders, investment into cannabis companies can.

Given his track record, Jensen is likely to appeal the decision to the Supreme Court. The case concerns a Constitutional question and the fact that the Ninth Circuit came to the opposition conclusion that the First and Second Circuit landed on increases the likelihood that SCOTUS will take up the case.

The final word: Interstate commerce is something that cannabis companies have been waiting for years — and something that President Trump’s executive order to reclassify the drug to Schedule III does not address.

It would create a much larger market for cannabis companies, and would ameliorate supply and demand issues that have caused some state markets to crash.

-ZH

“All of a sudden California doesn’t look so bad. It’s ripe for consolidation and it’s starting to happen. Stiiizy got a really big jump on it," Poseidon Investment Management co-founder and managing director Morgan Paxhia told SF Gate about Vireo Growth's acquisition of Eaze. 

Eaze was once valued at about $700 million. They were bought for $54 million.

On January 29th, Gotham and Cultivated will host our inaugural event: The Highrise.

The Highrise’s goal is to host an event where attendees represent the full breadth and depth of the cannabis industry in New York and throughout the country.

To do that, we are asking would-be attendees to apply to attend. Only by identifying leaders throughout the industry can we truly create a representative group of attendees for The Highrise.

Spots are limited so get your application in today » thehighrise.nyc

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