Social Equity and Interstate Competition: Maryland Cannabis Regulation Under Scrutiny in Federal Court

By Meg Nash, Bridgette Nikisher

Jan 31, 2024

On January 26, 2024, a complaint was filed in the U.S. District Court for the State of Maryland against the Maryland Cannabis Administration (MCA) seeking to prohibit the MCA from moving forward with the licensing process. 

The complaint alleges that the recent social equity licensing application round unfairly favored Maryland residents and, as such, alleges that MCA has violated the dormant commerce clause of the constitution. The dormant commerce clause prohibits states from enacting laws that discriminate against citizens of other states.  These types of lawsuits have become increasingly common in the context of cannabis licensing, including in New York, and have, unfortunately, been successful in delaying licensing processes.

The Plaintiff in this complaint argues that she satisfies the definition of a social equity applicant by attending a university where 40% of the individuals who attended the institution were eligible to receive a Pell Grant. The Plaintiff submitted all requested documentation through the Social Equity Portal but was informed that she did not satisfy the necessary criteria as she attended a university in California, and the social equity criteria stated that the qualifying university must be in Maryland. 

The Plaintiff has asked the court to issue an injunction that would:

  1. Prohibit the MCA from taking any further steps to process any applications for cannabis licenses from the recent application window
  2. Prohibit the MCA from enforcing any provisions of Maryland regulations that favor Maryland residents over out-of-state residents

Additionally, Plaintiff is seeking a declaratory judgment from the Court stating that certain provisions of the Maryland Cannabis Reform Act and COMAR 14.17.01 et seq. violate the dormant commerce clause. The implementation of such an injunction would likely delay the lottery that MCA expected to conduct this year. The MCA’s deadline to respond to the Complaint is February 20, 2024, no further hearings have been scheduled.

Vicente LLP is carefully monitoring this litigation and will provide updates on how this lawsuit may impact the anticipated cannabis business license lottery. Are you concerned about how this might impact your Maryland cannabis business license application? Use this link to schedule a complimentary call with Vicente partner Meg Nash.

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