The Supreme Court may eventually have to decide whether states can protect their own licensees

A new Congressional Research Service analysis says the growing split among federal appellate courts over residency requirements in state-licensed THC markets increases the likelihood that the U.S. Supreme Court eventually takes the issue.

The argument revolves around the Dormant Commerce Clause, the constitutional doctrine generally preventing states from discriminating against businesses simply because they’re from somewhere else.

The problem is that federal courts now disagree about whether that protection applies to a federally prohibited market.

The First Circuit, considering Maine, struck down residency requirements. The Second Circuit similarly found serious constitutional problems with New York’s preference for applicants whose qualifying convictions occurred inside New York.

Then the Ninth Circuit went the other direction this year in cases involving Washington and Sacramento, concluding that courts shouldn’t use the Dormant Commerce Clause to create an interstate market Congress itself continues to prohibit.

Deeper context: Peridot Tree could become much bigger than Washington

The Ninth Circuit case, Peridot Tree WA, Inc. v. Washington State Liquor & Cannabis Control Board, is worth remembering.

Washington requires significant ties to the state for certain business ownership. Peridot challenged those restrictions as unconstitutional economic protectionism.

The Ninth Circuit essentially answered: there can’t be a constitutional right protecting interstate commerce in something Congress says shouldn’t be traded interstate in the first place.

Maine and New York courts reached almost the opposite conclusion.

And April’s federal rescheduling action complicates everything further. CRS specifically notes that the Supreme Court might wait to see how lower courts reinterpret these cases now that at least some state-licensed medical activity has moved into Schedule III treatment.