When Alcohol Leads, Cannabis Follows – cannabusiness advisory

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The nascent cannabis market is significantly like a younger sibling, riding the wake of its forerunner, alcohol.  In joining the vice industry’s customer solutions marketplace segment, the cannabis market has had the advantage of becoming in a position to stick to in the footsteps of the alcohol market and anticipate possible upcoming obstacles.  This use of the alcohol market as a guinea pig can be readily observed in connection with the evolving legal and regulatory frameworks at the moment becoming formulated for cannabis.  It is in this light that the June 26, 2019 U.S. Supreme Court choice in Tennessee Wine &amp Spirits Retailers Association v. Thomas, a case regarding particular Tennessee alcohol regulations, can present some guidance and foreshadow the future of cannabis laws and regulations.

In Thomas, the Tennessee Wine and Spirits Retailers Association (a trade association of in-state Tennessee liquor retailers), sought relief from the Supreme Court in their endeavor to have particular Tennessee state regulations -which necessary state residency for holders of alcohol licenses- upheld.  Justice Alito and the Court ruled against the Association in their holding that such regulations had been unconstitutional.

Though a quantity of other regulations requiring that alcohol license holders and applicants in Tennessee be residents of the State had been aspect of the original case, only 1 such regulation was appealed to, and decided by, the Supreme Court in Thomas.  The regulation in query necessary applicants for an initial alcohol license in Tennessee to have resided in the State for the prior two years.  The Court, in its discovering that such regulation was unconstitutional, primarily based its argument on the Dormant Commerce Clause, noting that the 21st Amendment to the U.S. Constitution did not present any exemption.  The Dormant Commerce Clause, a legal doctrine inferred from the U.S. Constitution’ Commerce Clause and established by the courts, primarily prohibits state governments from restricting interstate trade and discriminating against out-of-state industrial actors.  The Thomas choice concluded that the alcohol residency requirement for licensure in Tennessee did in reality restrict interstate trade, by discriminating against non-Tennessee residents, and was not narrowly tailored to advance a reputable regional objective (a displaying of which would have permitted such discrimination and thereby, the regulation).

Interpreting the choice of Thomas by means of the lens of the cannabis market sheds some light on the future viability of state cannabis regulations that impose related state residency specifications as prerequisites for acquiring cannabis licenses.  The timing of Thomas is specifically noteworthy, provided the current implementation of Missouri’s state-level cannabis regulations, which involve residency specifications, and Colorado’s amendment of its current regulations, scaling back the restrictions on out-of-state ownership of Colorado cannabis licenses.

On June four, 2019, the State of Missouri adopted its 1st set of regulations to govern the health-related marijuana market in that state.  A single such regulation demands that any corporate entity applying for health-related marijuana licensure be at least majority owned by persons who have been residents of Missouri for at least 1 year.  Other states have similarly adopted their personal in-state ownership specifications as aspect of their respective cannabis licensing regulations.  Nevertheless, 1 such state, Colorado, lately reversed position, by passing a new law (HB19-1090) on Could 29, 2019, which methods back lots of of the State’s previously implemented residency specifications.

Offered the lack of case law pertaining to these new state cannabis laws and regulations, specifically at the federal level, the Thomas case and other folks arising from the alcohol market are useful in mapping out the prospects of their cannabis counterparts.  A lot of of the residency specifications identified in the cannabis regulations of particular states, such as Missouri, have similarities to these in the alcohol market, generating Thomas of unique import and casting a massive degree of doubt on the constitutionality of such regulations.  Nevertheless, the existing federal illegality of cannabis has had a chilling impact on litigation in the cannabis space, so any future use of Thomas to strike down the residency specifications of state cannabis regulations may possibly not come for some time.  With this possible delay in litigation, there is a distinct possibility that lots of of the states in query may possibly opt to take Colorado’s lead and stick to suit in repealing the regulations on their personal, in the pursuit of higher access to capital for their respective domestic cannabis industries.

 

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