Marijuana doesn’t enjoy free-trade protections, New York judge rules

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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.

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.

“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.