When states decide to legalize cannabis in some way, they must consider whether only state residents will be allowed to obtain cannabis business licenses. In 2016, Massachusetts and Maine became the first two New England states to legalize adult use cannabis. While adult use is legal in Vermont, the state has yet to pass legislation that establishes a system for retailing recreational cannabis.[1]Massachusetts did not establish a residency requirement, so those that own cannabis businesses in Massachusetts do not have to be Massachusetts citizens, as long as their businesses are registered in the state as a domestic business corporation or another domestic business entity. Conversely, Maine established a residency requirement when it legalized adult use cannabis, but, in May 2020, the state announced that it would stop enforcing this requirement.
According to Foley Hoag’s “Cannabis and the Law” blog, “[Maine]’s decision to drop the residency requirement is big news for marijuana companies already in Maine and for companies and investors hoping to enter the Maine marketplace. For companies already in Maine, the announcement means much-needed access to out-of-state capital. For out-of-state companies and investors, the announcement means increased access to a budding marketplace.”[2]However, according to Vanderbilt’s “Marijuana Law, Policy, and Authority” blog, United Cannabis Patients and Caregivers of Maine and two individual Maine residents sued their state’s licensing agency, arguing that failing to enforce the residency requirement violates Maine’s 2018 Marijuana Legalization Act, which includes a residency requirement to obtain a cannabis business license.[3]
When determining whether Maine will ultimately benefit from cutting its residency requirement, we must establish the residency requirement’s pros and cons. Harris Bricken’s “Canna Law Blog” notes that a residency requirement can be negative since it forces cannabis business owners to consider a much smaller pool of investors when attempting to raise capital and stifles competition and could ultimately reduce options available to consumers.[4]On the other hand, “Canna Law Blog” notes that a residency requirement can be positive in that it keeps profits from cannabis businesses within the local community, protects small businesses by prohibiting out-of-state corporations, and better assures that businesses will comply with the Cole Memo (a licensee has no need to transport cannabis across state lines when she lives in the same state in which she runs her business).[5]
Since Massachusetts is the only other state in New England to permit the recreational sale of cannabis, it is the best state to use as a benchmark when considering the necessity of Maine’s now unenforceable residency requirement. The following list is comprised of licensing aspects that are heavily impacted by residency requirements:
After comparing Massachusetts’s and Maine’s licensing regulations, unless you are a Mainer seeking a cultivation license, Maine’s residency requirement seems to benefit potential Maine licensees more than it hinders them. Overall, the residency requirement stops profits from leaving the local community and safeguards small businesses by disallowing out-of-state, large companies. Now that the residency requirement is being repealed, however, hopefully Mainers will find ways to adequately compete with the out of state corporations that are soon to enter their state.
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[1]https://potguide.com/vermont/marijuana-dispensaries/
[2]https://www.cannabisandthelaw.com/2020/05/15/maine-drops-residency-requirement-over-constitutionality-concerns/
[3]https://my.vanderbilt.edu/marijuanalaw/2020/06/locals-sue-seeking-to-force-maine-to-re-instate-residency-requirement-for-marijuana-licenses/
[4]https://harrisbricken.com/cannalawblog/marijuana-industry-residency-requirements/
[5]https://harrisbricken.com/cannalawblog/marijuana-industry-residency-requirements/
[6]https://www.rapidfinance.com/blog/the-pros-and-cons-of-going-green/
Brendon Stern is a second year law student at American University Washington College of Law. He is a member of his school’s Administrative Law Review, and he aims to pursue a career in providing legal counsel to cannabis business owners. Prior to starting law school, Brendon worked as a claims audit associate for Ankura Consulting Group, where he reviewed claims against asbestos trusts. He also received a Bachelor of Arts in Psychology and Linguistics from Emory University, where he helped professors research speech and language perception.
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