Investor Lawsuits Target Montana Cannabis Business Residency Requirement

The father-son team claim they invested in a cannabis company without knowing about the rule.

Two lawsuits seek to overturn Montana’s residency requirement, which mandates that all of its licensed marijuana businesses be majority-owned by in-state locals.

According to the Helena Independent Record, the suits were filed in both state and federal courts by a father-and-son team, Tom and Jerry Reed, after a multimillion dollar investment the two made in 2021 went south, which forced the pair to attempt to buy the company in question, called Therapeutic Essentials.

But when the pair contacted the state Department of Revenue for records about Therapeutic Essentials, the agency began formal proceedings to revoke the company’s business license, because Tom is a Nevada resident and Jerry is from Ohio.

Montana residency requirement lawsuit

The Reeds also have a separate civil lawsuit pending against MBM Management and Consulting, which talked the pair into the original investment and didn’t mention the state residency requirement. MBM effectively ran Therapeutic Essentials behind the scenes, though it didn’t own the actual business license, the Independent Record reported.

The lawsuit follows a multiyear trend of business interests upending state residency requirements for marijuana business ownership. Such legal provisions where once a staple of the U.S. cannabis industry, due to the siloed structure of the business and how every state has its own individual rules and supply chains.

But in recent years, residency requirements have fallen out of vogue with policymakers, and one such rule in Maine was thrown out by a federal judge.

A similar legal argument – that state residency requirements for marijuana business licensure are unconstitutional – was advanced by a Michigan entrepreneur who sued New York and two cities in California over their cannabis social equity program qualifications.

A residency requirement in Washington state, however, was upheld by another federal judge earlier this year, meaning there’s not yet clear legal precedent to settle the question.

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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