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MARIJUANA DOESN’T ENJOY FREE-TRADE PROTECTIONS, NEW YORK JUDGE RULES

By Chris Roberts, Reporter
February 5, 2024 - Updated February 5, 2024

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Ranks of women, minority cannabis execs rebound to pre-pandemic levels,
according to the latest data from the MJBiz Diversity, Inclusion and Equity
Report. Get your copy here.

--------------------------------------------------------------------------------

A federal judge has rejected the latest effort by out-of-state applicants to
stop New York state from licensing adult-use cannabis stores, ruling in part
that constitutional free-trade protections don’t apply to federally illegal
marijuana.

After the resolution of separate lawsuits that had frozen the ongoing rollout of
New York’s legal market, two California-based companies filed a suit in December
that sought to keep the state from issuing more adult-use retail licenses.

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That suit used a familiar argument: The U.S. Constitution’s dormant commerce
clause prohibits states from setting rules that favor state residents, according
to court filings made in court by Beverly Hills-based attorney Jeffrey Jensen.

According to documents, Jensen is 49% owner of companies Variscite NY Four and
Variscite NY Five, and two other individuals convicted of marijuana-related
offenses in California are 51% owners.

But U.S. District Judge Anne Nardacci wrote in her Friday ruling dismissing the
lawsuit that “the balance of equities tips” in the favor of New York, which
demonstrated the “significant harm” that would be caused if the state’s
adult-use program were delayed again.

Nardacci also rejected the plaintiffs’ argument that the dormant commerce clause
protects cannabis businesses.

Other federal courts have been split on that question, she noted.

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“Congress exercised its Commerce Clause power to pass the (Controlled Substances
Act) and thereby prohibited a national market for cannabis,” she wrote.

“Given that the national market for cannabis is illegal, it would make little
sense to apply the dormant Commerce Clause to New York’s cannabis licensing
scheme.

“Doing so would only encourage out-of-state participation in the New York
cannabis market, which would be contrary to Congress’s exercise of Commerce
Clause power in enacting the CSA.”

In a statement to the Associated Press, New York Attorney General Letitia James
welcomed the ruling.

“This is an important victory in our efforts to ensure that disproportionately
impacted communities are given their fair share in the legal cannabis industry,”
she said in the statement.

Other lawsuits targeting New York’s marijuana regulations, including one filed
by white men alleging racial discrimination, are pending.

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.

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