Federal appeals court strikes down NY marijuana license rules

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A federal appeals court has ruled that New York state’s marijuana dispensary licensing system is unconstitutional.

Under the state’s licensing procedure, applicants for dispensary licenses have an advantage in obtaining a license if they (or their close relatives) have a conviction for a marijuana-related offense under New York law.

In a decision released Tuesday, the U.S. Court of Appeals for the Second Circuit ruled that “the dormant Commerce Clause applies and Congress has given New York no clear permission to enforce protectionist marijuana licensing laws, and that New York’s prioritization of applicants with convictions under New York law is a protectionist measure that cannot stand.”

“This case is the byproduct of the federal government’s unusual and ambivalent regulation of marijuana. It is hard to seriously imagine states passing protectionist legislation in most federally criminalized interstate markets — few state legislatures would bother passing laws to favor their local hitmen,” the court wrote.

“In this strange circumstance, where a layperson might think that marijuana is actually legal in New York, we nevertheless apply a familiar rule: state protectionism is forbidden unless Congress says otherwise — and Congress has not said otherwise,” the court wrote.

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The plaintiffs in the case are Variscite NY Four LLC, and Variscite NY Five LLC, which are majority-owned by California residents, who have applied for licenses to operate marijuana dispensaries in New York.

“The dormant Commerce Clause prohibits state protectionism unless Congress clearly authorizes specific protectionist laws,” the Second Circuit wrote.

“The only thing Congress has clearly authorized by criminalizing marijuana is federal prosecution for the manufacture, distribution, and possession of marijuana.  Congress has given New York no clear permission to favor its residents over others whose businesses skirt the federal drug laws,” the court wrote.