Attorneys debated the Constitution’s dormant Commerce Clause in a federal appeals court. The matter at hand was how the clause impacts New York’s cannabis licensing program. This heated legal confrontation arises amid the federal government’s failure to formally recognize an interstate cannabis market.
A West Coast Challenge to New York’s Priority System
California attorney Jeffrey Jensen took his case to the U.S. Court of Appeals for the Second Circuit in Manhattan. He sought an injunction against New York’s cannabis dispensary licensing process. Jensen argues the state’s program unfairly favors New York residents, specifically those with cannabis-related convictions under New York law.
“The dormant Commerce Clause applies here,” Jensen asserted. He emphasized that Congress has implicitly acknowledged cannabis as a national market despite its federally illegal status.
Jensen represents two entities, Variscite NY Four and Variscite NY Five, as part-owner alongside social equity applicants with cannabis convictions in California. However, his claims face resistance from New York’s Office of Cannabis Management and its legal team, led by Assistant Solicitor General Alexandria Twinem.
The Role of the Dormant Commerce Clause
Twinem argued that the dormant Commerce Clause, which prevents states from enacting protectionist measures that restrict interstate commerce, does not apply to cannabis. “Congress has not permitted interstate commerce of the product,” she contended.
A federal appeals judge highlighted the broader implications, noting, “The real issue is whether this is the appropriate time to address the dormant Commerce Clause’s application—a matter that has surfaced in multiple federal courts.”
Jensen criticized New York’s program for its alleged lack of transparency. “Initially, nothing in the program indicated that cannabis convictions must be under New York law,” Jensen said. He accused the state of rapidly changing the rules in a way that disadvantaged out-of-state applicants.
State Licensing Faces More Setbacks
The legal battle comes as New York’s licensing process faces additional setbacks. Earlier this month, an Albany trial court judge issued a preliminary injunction. This move barred the state from processing conditional Adult-Use Retail Dispensary (CAURD) license applications unless applicants secured a location and notified the municipality by November 17, 2023.
This ruling directly impacts Variscite, whose application remains incomplete due to the lack of a secured location. Twinem argued this procedural shortfall diminishes the company’s claim of constitutional harm. She pointed out that Variscite ranked 816th among “extra priority” applicants.
Judge Rejects an Injunction
Meanwhile, Albany Judge Anne M. Nardacci dealt another blow to out-of-state applicants by rejecting their challenge to New York’s licensing program. Nardacci ruled that granting an injunction would stall the rollout of legal dispensaries and allow unlicensed businesses to continue dominating the market.
In her written decision, Nardacci emphasized the public interest in establishing a regulated cannabis market. “The public interest outweighs the concerns raised in this lawsuit,” she wrote. The judge added the dormant Commerce Clause does not apply to the federally illegal cannabis trade.
Attorney General Leticia James celebrated the decision. “This is an important victory in our efforts to ensure that disproportionately impacted communities are given their fair share in the legal cannabis industry,” she stated.
Criticisms of New York’s Licensing Process
New York’s licensing program launched in September 2023. It’s part of a broader effort to address the harms of the war on drugs. It aims to prioritize individuals with past cannabis convictions. The program’s rollout has faced criticism for its slow pace and bureaucratic hurdles. For example, there’s been a delay in launching a $200 million social equity fund intended to support licensed applicants.
Lawyers for the state argued the application process allows out-of-state residents to qualify if they can demonstrate residency in areas disproportionately affected by cannabis prohibition. Despite these assurances, critics maintain the system favors New York residents.
Black Market vs. Legal Dispensaries
As legal battles rage, New York’s cannabis market remains heavily influenced by unlicensed sellers who operate without regulation. State officials hope that increasing the number of licensed dispensaries will curtail the black market. In turn, opportunities may be created for those historically marginalized by drug enforcement policies. For now, the legal skirmish over New York’s cannabis licensing program continues.
