4th Circuit upholds key part of MD’s cannabis regulation system

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The U.S. Court of Appeals for the Fourth Circuit earlier this month upheld a key part of Maryland’s regulatory scheme for cannabis.

The court on Sept. 2 upheld a provision of Maryland’s marijuana licensing law that prioritizes applicants who attended Maryland universities where high percentages of the student body receive financial aid.

A three-judge Fourth Circuit panel ruled that the in-state university preference did not discriminate against out-of-state applicants, and that the Dormant Commerce Clause, which prohibits protectionist state policies, doesn’t apply to cannabis because it remains illegal at the federal level.

The plaintiff was California resident Justyna Jensen, who sued the state in January 2024 after being told she was ineligible for a social-equity license because she had never lived or gone to college in Maryland. A month later, U.S. District Judge Brendan Hurson in Maryland rejected Jensen’s motion for a temporary restraining order and preliminary injunction, and she appealed.

According to The Outlaw Report, a news outlet covering cannabis in Maryland, Virginia and Washington, D.C., Jensen and her husband Jeff Jensen are “serial” litigants against states’ social-equity cannabis licensing programs.

Fourth Circuit Judge DeAndrea Benjamin, joined by Judges Paul Niemeyer and Nicole Berner, affirmed the lower court.

“Anyone from any state can qualify under any of the criteria of a social equity applicant — including the in-state institution requirement,” Benjamin wrote. “That the qualifying universities are in Maryland does not require Maryland residency. A non-Maryland resident could qualify under this criterion by attending one of the qualifying universities.”

After the ruling, Jensen filed a motion indicating she would ask for a rehearing before the full Fourth Circuit.

In legalizing recreational cannabis use in Maryland, the 2023 Cannabis Reform Act also sought to address the racial inequity caused by the war on drugs, which saw disproportionate numbers of Black people incarcerated for low-level drug offenses. One of the ways the state attempted to do so was by awarding some of its cannabis licenses to people from the most impacted communities.

In addition to a lottery system for licenses, the state also reserved licenses for “social equity” applicants. Applicants could be eligible if they lived in a disproportionately impacted ZIP code for five of the 10 years before the application, attended a public school in such an area for five years, or attended for at least two years a university in Maryland where at least 40% of students receive Pell Grants.

The last qualification applies to Maryland’s four historically Black universities — Morgan State, Coppin State, Bowie State and the University of Maryland Eastern Shore — plus the University of Baltimore and Washington Adventist University, which each have high proportions of Black students.

The Maryland Cannabis Administration, defended by the Office of the Attorney General, argued the Dormant Commerce Clause doesn’t apply to the recreational cannabis market because of the federal prohibition. And even if it did apply, the state argued the university-attendance criterion doesn’t favor Maryland residents.

“We agree with the Administration,” the opinion states.

“Under any of the criteria, including the in-state institution criterion challenged here, Jensen could have been a resident of Maryland or a resident of any other state and have been eligible,” Benjamin wrote. “She simply didn’t qualify.”