Interstate commerce hopes may rest on litigation, prominent attorney says

Some companies may take matters into their own hands.

Interstate cannabis commerce is the golden goose for many small marijuana businesses, particularly in the saturated markets on the U.S. West Coast.

But so far, attempts to get legal shipping of marijuana products over state lines has been stymied, with the latest blow coming from California Attorney General Rob Bonta, who dashed stakeholders’ hopes with a memo asserting that interstate cannabis commerce still poses a legal risk from federal authorities.

The move derailed a plan from some cannabis industry insiders to jumpstart interstate cannabis trade, since the scheme was predicated on Bonta’s support from a legal angle.

But cannabis activists are nothing if not persistent.

Jason Horst, president of the International Cannabis Bar Association, said that while Bonta’s decision was disappointing, it doesn’t mean that the fight to open state borders to cannabis exports and imports is over. Rather, it just signals that the fight is moving into a different phase – and it’s one that may rely on the courts instead of politicians, he said.

The first thing that’s likely to happen, Horst said, is that state governments will begin asking the U.S. Department of Justice for formal guidance on how it would view or handle some kind of regulated interstate cannabis trade. Such guidance isn’t without precedent. The Cole Memos in 2009 and 2013 from the Obama-era DOJ set the stage for medical cannabis industry growth and then full-on recreational sales, which began in 2014.

At the time, the memos laid out specific parameters under which the DOJ would maintain a hands-off approach to the cannabis trade, despite its federal illegality.

The same approach could be taken with interstate commerce at the behest of governors, Horst said. And, he noted, there are some East Coast markets already expressing tepid interest in interstate commerce, such as New Jersey, where state Senate President Nicholas Scutari introduced a bill again this year to give his governor the power to “authorize interstate commercial cannabis activity in certain circumstances.”

“You’re going to see states turn more directly to the federal government and demand guidance from DOJ as to whether it would treat regulated interstate sales differently than regulated intrastate sales,” Horst said. “From a constitutional perspective, there’s very little reason to believe that the treatment should be any different.”

If the DOJ were to issue such guidance, Horst predicted that some companies may then take matters into their own hands and begin suing specific state governments, under the argument that preventing interstate marijuana commerce is unconstitutional, per the Dormant Commerce Clause.

Such lawsuits could point to a First Circuit Court decision in 2022 from Northeast Patients Group vs. United Cannabis Patients & Caregivers of Maine, which found the Dormant Commerce Clause does apply to the cannabis industry, and in doing so negated a state residency requirement that prevented out-of-state business interests from entering the Maine market, Horst said.

“There are almost certainly going to be some states that need to be compelled to engage in this process, likely through litigation, and I think you’ll see more of that in the coming months and years,” Horst said.

“There are absolutely stakeholders in states like California – where there’s an overabundance of supply, and from which the nation’s cannabis has been supplied for generations – who are not going to be willing to wait for politicians to wring their hands indefinitely on this.”

The flip side of that legal theory, however, is that a federal court in Washington state recently found that due marijuana’s federal illegality does preclude application of the Dormant Commerce Clause. That could set up a showdown between circuit courts, with the question thus being forced to be decided by the U.S. Supreme Court.

All of which means there’s a lot of high-stakes litigation likely coming in the near future which could fundamentally reshape the entire U.S. cannabis industry.

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

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