A federal judge in Jefferson City barred Missouri cannabis regulators from enforcing state residency requirements for medical marijuana license majority ownership. If not appealed to a higher court, the preliminary injunction ordered Monday could result in a massive boost to Missouri’s legal cannabis industry, as one of the biggest barriers to cultivation operations has been the availability of in-state originating capital.
The case was brought by Mark Toigo, a Pennsylvania resident and minority owner of Organic Remedies MO, which owns a cultivation license in Chaffee and three dispensary licenses in Fenton, Sedalia, and Cape Girardeau. Toigo, who also owns and operates a similarly named group of dispensaries in Pennsylvania, is seeking to become a majority owner of the Missouri group, but is prevented from doing so by Missouri’s requirement that only residents who have lived in the state for at least one year own 51% of the license equity. However, Judge Nanette Laughrey found that Missouri’s residency requirement violates the federal constitution’s commerce clause, which “prohibits states from enacting laws ‘that discriminate or unduly burden interstate commerce,’” she wrote.
[Download Judge Nanette Laughrey’s decision on Toigo v. DHSS]
As of Monday, only 23 of the state’s 60 cultivation licenses are certified to operate, according to data from the Missouri Department of Health and Senior Services (DHSS). Earlier this year, investors and license holders told Grown In that the low number of operating cultivators is a direct result of the difficulty of finding Missouri-based capital.
The ruling, “is not a surprise because Missouri was trying to do something you can’t do,” said Jon Loevy, principal owner of Justice Grown, which owns five dispensary licenses and three cultivation licenses, all inactive, in Missouri. “We’re already a majority owner, but certainly everyone is going to be taking another look at what comes in the future.”
“Most non-resident investors feel handcuffed by the current program,” Mark Toigo told Grown In last January. “This is a capital-intensive industry. Hindering the ability for investors to freely operate within the space will cause system failure.”
Missouri’s residency requirement is one more in a string of state and local residency requirements that have been struck down in federal courts by the constitution’s commerce clause. Last week, in Detroit, a federal judge stopped a city license plan to limit adult-use licenses to city residents. Another local residency plan, in Portland, Maine, was halted last August.
A DHSS spokesperson did not respond to a request for comment by publication.