Pennsylvania marijuana investor sues Missouri over residency rule

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A Pennsylvania man has sued Missouri medical marijuana regulators, declaring that the state’s residency requirement violates the U.S. Constitution and stifles investment in the industry.

The lawsuit, filed last week in U.S. District Court in western Missouri, is the latest in a wave of legal challenges to marijuana business residency requirements across the country.

Maine backed off its residency requirement after being sued, but other industry players are challenging the state’s action.

Lawsuits over residency requirements are pending in Oklahoma and Washington state.

The Missouri suit was filed by Mark Toigo, who describes himself as an investor in Pennsylvania’s medical marijuana industry and a minority investor in Organic Remedies Missouri, which has multiple licenses in the state.

Missouri’s residency rule requires that entities are owned at least 51% by residents of the state.

According to the 11-page complaint:

“The real effect of the residency requirement has been and will continue to be to stifle Missouri’s medical marijuana program by severely restricting the flow of investment into the state.

“This will mean that Missouri’s medical marijuana businesses will be not be able to access the capital necessary to build a vibrant, viable and successful industry.”

Lisa Cox, spokeswoman for defendant Missouri Department of Health and Senior Services, declined comment on the suit.

Toigo’s suit, which requests that the state be barred from enforcing the residency requirement, claims:

  • The residency requirement violates the U.S. Constitution’s commerce clause.
  • Harms businesses owned by Missouri residents by “arbitrarily limiting the universe of available investors and business partners available to these businesses.”
  • Specifically limits Organic Remedies’ ability to raise capital and sell equity which, in turn, decreases the value of the business.

The recently updated Marijuana Business Factbook projects that MMJ sales in Missouri will reach $375 million-$475 million annually by 2024.

Sales started in October, but only 17 dispensaries had opened as of last week, according to the St. Louis Post-Dispatch.

The Missouri MMJ program has been beset by appeals, lawsuits and an FBI investigation.

– Jeff Smith