As The Market Awaits Cannabis Reform, One Lawsuit Could Upend Interstate Commerce Prohibition
One of the most critical components to cannabis industry success and scalability is interstate commerce. For many advocates, interstate commerce is imperative to a state or federal legal program. However, federal law creates a currently insurmountable wall to that goal.
Currently, brands can only legally ship cannabis within state borders. If a company plans to become a multi-state venture, it must replicate its process across state lines rather than move products between its licensed jurisdictions. The regulations impact bottom lines severely. Between licensing, duplicating the business and hiring necessary staff, operating costs can easily reach the six-figure or much higher mark.
At the same time, many states suffer from a surplus of cannabis, severely hindering market potential and business viability. One of the most telling examples has been Oregon, where a years-long overabundance has resulted in prices bottoming out.
Interstate commerce is often viewed as a relief for those states, notably Oregon, California and others producing notoriously high-quality cannabis. Most experts seem to think that cannabis reform will come through Capitol Hill. But with interstate commerce making little headway in DC at this time, some are turning to the courts for possible change.
As reported by MJ Biz's Chris Roberts, the November 2022 lawsuit against Oregon governor Kate Brown was brought on by in-state distribution company Jefferson Packing House. The brand seeks to reform Oregon's current prohibition on interstate shipping, calling the current rules unconstitutional.
If successful, the suit would mark the latest progress for the interstate cannabis movement in Oregon. In 2019 the state signed off on legislation allowing interstate commerce if federal law were to permit it. If successful, the suit could compel the state to go forward with the plan despite the national status quo.
Uncertainty about the suit's outcome can be warranted, but precedence is being cited. The plaintiffs plan to use the same argument that helped overturn Maine's medical market state residency requirements in 2022. Attorneys for the plaintiffs indicate they feel that federal courts will invalidate the prohibition on the state level, notwithstanding the federal ban. If so, Oregon could go forward with the plan if at least one other state were to participate.
Roberts notes that a long legal road is ahead even if the case is successful. The case would almost certainly have to pass through the 9th Circuit of Appeals and potentially the US Supreme Court. If a favorable ruling was upheld, Oregon would still need to create a regulatory structure with at least one other state to begin interstate cannabis commerce.
If allowed, interstate commerce would be a groundbreaking development for the marketplace. Brands would immediately have the chance to improve market awareness and retail reach. In doing so, consumers would have access to favorites they may not have previously been able to purchase. The benefits to top-producing brands would be immediately noticeable as new markets take shape. At the same time, some states would likely face significant setbacks and consolidation as higher-quality, out-of-state cannabis enters their legal marketplaces.
Nothing is without its drawbacks, but for most in the cannabis industry, interstate commerce benefits outweigh the potential disadvantages. No matter the case's outcome in Oregon, interstate commerce will likely remain a brass ring for the industry for years to come. When it will be grasped is to be determined.
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