Court upholds Wash. residency requirement for pot industry

A U.S. judge has upheld Washington’s residency requirement for involvement in the state’s legal cannabis industry — a decision at odds with a federal appeals court ruling concerning a similar requirement in Maine.

A man who co-owns a chain of Washington cannabis stores called Zips, Scott Atkinson, wanted to transfer part of his ownership interest to a longtime friend who lives in Idaho, Todd Brinkmeyer. Atkinson has been treated for cancer and said he hoped Brinkmeyer would help take over the business should his health deteriorate.

But Washington requires owners and investors in regulated marijuana businesses to have lived in the state for at least six months, and Brinkmeyer said he has no intention of moving.

Brinkmeyer sued the Washington Liquor and Cannabis Board in 2020, arguing that the residency requirement was unconstitutional because it interferes with interstate commerce — which is the purview of Congress — and discriminates against him as an out-of-state resident.

U.S. District Judge Benjamin Settle in Tacoma disagreed in a ruling issued Monday. He found that the residency requirement couldn’t interfere with interstate commerce because there is no legal interstate commerce in marijuana — the drug remains illegal under federal law.

“Although Washington’s ‘legalization’ of cannabis certainly does not align with Congress’s intent, the residency requirements do,” Settle wrote. “The residency requirements attempt to prevent any interstate commerce in cannabis and to prevent cannabis from Washington from moving into states where it remains illegal, like Idaho.”

Further, Settle ruled, Washington was not discriminating against Brinkmeyer as an out-of-state resident under the Constitution’s “Privileges and Immunities Clause” because “it has never been established that there is any right … to engage in illegal commerce.”

The ruling was at odds with a decision from a federal court judge in Maine who struck down a residency requirement in that state’s medical marijuana program. The First U.S. Circuit Court of Appeals — so far the only federal appeals court to consider the matter — upheld that ruling last summer, saying that whether legal or not, there is interstate commerce in marijuana, and it’s up to Congress to regulate it.

Dan Oates, an attorney for Brinkmeyer, said in an email Tuesday they were evaluating whether to appeal Settle’s order.

“It is unfortunate, particularly because, as the court acknowledged, the ruling stands in stark contrast to the majority of rulings by other federal courts on this same issue,” Oates said.

Washington and Colorado in 2012 became the first U.S. states to legalize the recreational use of cannabis for adults. Washington limited investment in and ownership of its licensed cannabis businesses to within the state, largely in hopes of persuading the U.S. Justice Department not to challenge its legal marijuana law in court.

Two Washington cannabis industry groups — the Washington CannaBusiness Alliance and the Craft Cannabis Coalition — urged the court to strike down the residency requirement, saying it unfairly limits access to investment.

“The livelihoods of thousands of citizens depend on this industry,” the groups wrote. “These citizens are adversely affected by the State’s exclusionary and protectionist policies that restrict their ability to raise capital and grow their businesses.”