Michigan Man Who Sued NY Over Cannabis Licensing Goes After Washington State

The Michigander has been suing state and city governments over cannabis licensing residency requirements.

A Michigan cannabis entrepreneur on a quest to remove residency requirements from adult-use cannabis programs continues to stay busy in state courts.

Kenneth Gay, the owner of Peridot Tree WA Inc., challenged the Washington State Liquor and Cannabis Control Board’s decision to reject his company’s application for a retail license under the state’s social equity program. The program, designed to allocate nearly four dozen cannabis retail licenses, was created to compensate individuals disproportionately affected by the federal drug war.

The lawsuit, filed last week, argues that the rejection is unjust, pointing to Gay’s past cannabis conviction as a qualifying factor for the program. However, a hurdle in Gay’s claim is his noncompliance with Washington’s six-month residency requirement, a stipulation he claims is unconstitutional under the dormant commerce clause.

This isn’t Gay’s first attempt to navigate around state-specific cannabis licensing regulations. His companies have initiated similar legal challenges in other states, including New York and California, questioning the constitutionality of residency requirements.

In New York, state regulators eventually granted a retail dispensary permit to Gay’s company, Variscite NY One Inc., wrapping up his lawsuit against their residency rules.

In response to his suit, the Washington cannabis board urged the federal court to dismiss Gay’s request for a temporary restraining order that would halt the issuance of all licenses under the equity program. The board’s opposition memorandum cites Gay’s timing of the litigation as a strategic maneuver to exert pressure on the licensing process:

“No matter how Peridot’s delay is measured, it is lengthy: more than eight years from the implementation of the six-month residency requirements; more than three years since the Social Equity Program was created; 13 months since the regulations were adopted; and 82 days since Peridot’s application was denied.

Courts – including this Court – have routinely denied motions for preliminary injunctive relief – let alone temporary restraining orders – based on delays that were comparable or shorter in duration than even the most generous interpretation here.”

The board defended the residency requirement as a vital component of their strategy to prevent market monopolization by “a few large businesses.” The body argued that without such regulations, the state risks inadvertently allowing out-of-state entities and individuals, who already own multiple cannabis businesses, to dominate the local market.

That scenario is illustrated by Gay and Jeffrey Jensen, a shareholder in Peridot Tree, who jointly own cannabis businesses in other states including Variscite NY, the board said.

The board also criticized Peridot Tree’s delay in challenging the decision, noting the lack of urgency in their legal approach. According to state regulations, the company had a 20-day window to appeal the board’s decision, which they did not utilize.

KennethGayRejectionComplaint

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Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.


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