Could Residency Lawsuits Upend Social Equity in Cannabis?

Several pending cases are in progress challenging the programs.

A series of lawsuits challenging residency requirements in at least three states has some advocates of cannabis industry social equity programs worried that those programs could be in jeopardy. And they have good reason to be concerned.

The jury is still out – figuratively, but not by much of a stretch – on whether social equity programs will be able to withstand scrutiny by the federal court system as time goes on.

Already, a residency requirement in Maine has been thrown out as unconstitutional by a federal judge, and another federal judge has issued an injunction against New York’s social equity program precisely because of its residency requirement.

Similar cases in Sacramento and Los Angeles haven’t yet concluded, but rulings are on the way, one way or the other. The Sacramento case is under appeal, and the L.A. case is ongoing.

So is the New York lawsuit, which observers said could ultimately result in the overturning of the entire licensing regime, which is based on social equity principles but reserved for New York residents only.

“It calls the viability of the program into question,” attorney Matt Leonardo told last month of the lawsuit, which kept regulators from issuing 18 permits in November. “It places the whole program in jeopardy.”

The legal peril for many of these programs could also give pause to more state and local regulators who may otherwise be eager to adopt social equity cannabis market structures. These are generally designed to give licensing priority to those who have nonviolent criminal marijuana convictions.

For instance, a number of cities across California have been considering creating new social equity programs, because state lawmakers dedicated $15 million in funding to local governments that create such business opportunities, but many of those may slow down or scrap those plans altogether, some say.

“All of this means the less equity programs are up and running by the time federal legalization rolls around, the less protective shield we have in California against corporate consolidation,” Robert Chlala, a board member of the Social Impact Center of Los Angeles, told Filter Magazine.

At the very least, it calls into question how lawmakers will be able to craft social equity programs that are targeted enough to benefit only local entrepreneurs, instead of being forced to structure them for a national audience of cannabis companies.

John Schroyer

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