Maryland Appellate Court: Cannabis Reform Act

Constitutional; Cannabis Reform Act

BOTTOM LINE: Where the circuit court held that the Cannabis Reform Act creates an unconstitutional monopoly under Article 41 of the Maryland Declaration of Rights, it erred.

CASE: Moore v Maryland Hemp Coalition, No. 1590, Sept. Term 2023 (filed Sept. 9, 2025) (Judges Nazarian, FRIEDMAN) (Judge ZIC joins in judgment only).

FACTS: The Hemp Coalition challenges the Cannabis Reform Act’s cannabis licensing requirement, which prohibits businesses from selling certain cannabis products, including hemp-derived psychoactive products, unless they obtain a cannabis license. The circuit court enjoined the state from enforcing this licensing requirement on people selling hemp-derived psychoactive products, but permitted the state to continue to issue cannabis licenses. Both sides appeal.

LAW: The circuit court found, on its own initiative, that the 2018 federal farm bill preempted the Cannabis Reform Act’s licensing scheme because it found that the state had failed to submit a regulatory plan to the USDA. But Maryland did submit a hemp plan in 2020. The Hemp Coalition thus has no likelihood of succeeding in any argument regarding preemption.

The circuit court also erred when it found that the Hemp Coalition was likely to succeed on the merits of its claim that the Cannabis Reform Act creates an unconstitutional monopoly under Article 41 of the Maryland Declaration of Rights. The Hemp Coalition cannot succeed on the argument that the Cannabis Reform Act creates an unconstitutional monopoly in either the broader cannabis market or the limited hemp-derived psychoactive products market because the law satisfies the common right and public interest exceptions to Article 41.

The circuit court found in its opinion granting the preliminary injunction, and the Hemp Coalition argues on appeal, that the Cannabis Reform Act’s lottery system and application fee violate Article 41. In particular, the Hemp Coalition argues that the application fee restricts the class of people who may apply and that the use of a lottery to determine who receives a license is unfair. This court disagrees.

Both the application fee and the lottery are applied to all applicants who reach those stages in the application process. Thus, because license applicants are uniformly subject to the application fee and lottery, neither component of the Cannabis Reform Act violates Article 41.

The circuit court also found that the Hemp Coalition was likely to succeed on the merits of its argument that the Cannabis Reform Act violated the equal protection component of Article 24 of the Maryland Declaration of Rights. Specifically, it found that the Hemp Coalition was likely to succeed on the merits of its argument that the social equity applicant designation in the Cannabis Reform Act was irrational.

This finding was erroneous as a matter of law. Under the deferential review afforded regulatory schemes such as the Cannabis Reform Act under Article 24, the Cannabis Reform Act’s social equity program is not arbitrary. This court also finds that the use of zip codes in the social equity program is not arbitrary; the social equity program is permissible even if it is overinclusive or underinclusive and the cannabis license application review program is not arbitrary.

The circuit court found that the balance of convenience weighs in favor of the Hemp Coalition because it and its members cannot sell their products despite voluntary compliance with the Cannabis Reform Act’s safety measures, and because the state will be unharmed by the limited scope of the injunction. While the circuit court properly recognized the important business interests that the Hemp Coalition has for an injunction, it misperceived the state’s interests.

The circuit court abused its discretion in finding that the public interest weighed in favor of the Hemp Coalition. And although the circuit court properly exercised discretion in finding the Hemp Coalition would suffer irreparable injury absent a preliminary injunction, it failed to consider the important public interests the state attempts to achieve under the Cannabis Reform Act, including protecting the public health. Therefore the grant of the preliminary injunction is reversed.

In its cross-appeal, the Hemp Coalition argues that the circuit court’s refusal to enjoin the state from issuing future licenses was erroneous because the state could continue to commit the alleged constitutional violations caused by the social equity applicant designation. Assuming, without deciding, that the Hemp Coalition has standing to challenge the issuance of licenses, the Hemp Coalition’s challenge ultimately fails. It fails because the Hemp Coalition’s challenge to the first round of licenses is moot and because the Hemp Coalition’s challenge to subsequent license rounds is not yet ripe.

Judgment of the Circuit Court for Washington County reversed in part, affirmed in part.