News Summary
A federal appeals court has ruled New York’s cannabis licensing program unconstitutional, citing its preferential treatment for local applicants over out-of-state applicants. The decision challenges the legality of the state’s ‘extra priority’ policy that is seen as discriminatory. Legal experts suggest this ruling could prompt other states to reevaluate similar cannabis licensing regulations, as the case highlights significant issues surrounding the dormant Commerce Clause. The ruling not only impacts New York but could also have far-reaching implications for cannabis policies nationwide.
New York — A federal appeals court has ruled that New York’s cannabis licensing program is unconstitutional for favoring local applicants over those from other states. On August 12, 2025, the U.S. Court of Appeals for the Second Circuit issued the judgment, declaring that the state’s “extra priority” policy for select licensing applicants violates the dormant Commerce Clause of the Constitution.
The court’s decision specifically scrutinized the Marihuana Regulation and Taxation Act (MRTA), which was enacted in 2021 to create a tiered application process for businesses seeking cannabis licenses. Under this law, a “December Pool” was established for those applying for provisional licenses, with additional advantages granted to applicants who met certain criteria, such as having a cannabis-related conviction in New York prior to March 31, 2021.
The core of the lawsuit was brought forth by Variscite NY, a cannabis company with majority owners based outside of New York. Variscite argued that the licensing scheme discriminated against its out-of-state owners who had prior marijuana convictions in California, thus excluding them from the “extra priority” status that favored local applicants.
In its ruling, the appeals court stated that New York did not successfully prove that its discriminatory policy was the sole means to achieve its goals of restorative justice. The majority opinion highlighted that the conviction requirement effectively served as a proxy for residency, as it could not apply to actions committed in states other than New York. The court noted that preferences granted to local applicants amounted to economic protectionism, thereby contravening the principles set forth in the dormant Commerce Clause.
The Cannabis Control Board and the Office of Cannabis Management defended the licensing structure, asserting that it was designed with restorative justice in mind rather than as a protective measure for local businesses. However, the court remained unconvinced, emphasizing that any special provisions protecting in-state businesses must be explicitly permitted by Congress.
While the ruling primarily concerns the “extra priority” aspect of the provisional adult-use licenses issued in the December 2023 application pool, it has broader implications. Legal analysts have indicated that this decision may prompt other states with similar cannabis licensing schemes to reassess their regulations to avoid facing comparable legal challenges.
The ruling also affects ongoing litigation regarding New York’s cannabis laws, which have come under scrutiny for being discriminatory. Variscite, however, was found not to have standing to challenge other components of the licensing process since it was not established in time to apply for other available licenses.
The appeals court has sent the case back to the U.S. District Court for the Northern District of New York for further consideration. The decision not only challenges the existing framework within New York but also raises questions about the validity of state-level social equity initiatives across the country, particularly those that may discriminate against out-of-state applicants.
As the cannabis landscape continues to evolve, this ruling may lead to a circuit split that could eventually necessitate a definitive resolution from the U.S. Supreme Court regarding the application of the dormant Commerce Clause in relation to state cannabis laws.
The dissenting opinion from Chief Judge Debra Ann Livingston argued against the majority’s application of the dormant Commerce Clause in the context of the cannabis market, given its illegal status under federal law. Nonetheless, as the legal landscape adapts, the ramifications of this ruling could resonate far beyond New York, shaping the future of cannabis policy and licensing across the nation.
Deeper Dive: News & Info About This Topic
- The New York Times: New York Cannabis Licensing Unconstitutional
- Cannabis Business Times: Federal Court Rules on Dormant Commerce Clause
- News 10: Cannabis Licensing and Dormant Commerce Clause
- MJBizDaily: New York’s Social Equity in Federal Court
- Crain’s New York: Ruling on NY Cannabis Program Effects
- Wikipedia: Cannabis in the United States
- Google Search: New York cannabis licensing
- Encyclopedia Britannica: Cannabis
Author: STAFF HERE NEW YORK WRITER
NEW YORK CITY STAFF WRITER The NEW YORK CITY STAFF WRITER represents the experienced team at HERENewYorkCity.com, your go-to source for actionable local news and information in New York City, the five boroughs, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as New York Fashion Week, Macy's Thanksgiving Day Parade, and Tribeca Film Festival. Our coverage extends to key organizations like the Greater New York Chamber of Commerce and United Way of New York City, plus leading businesses in finance and media that power the local economy such as JPMorgan Chase, Goldman Sachs, and Bloomberg. As part of the broader HERE network, including HEREBuffalo.com, we provide comprehensive, credible insights into New York's dynamic landscape.
