Federal Judge kills residency requirement for medical marijuana licenses

In a bench trial that lasted only 7 minutes, U.S. District Judge Nanette Laughrey said that she will grant a permanent injunction with a written order to follow.

Laughrey had granted a preliminary injunction in June. At that time, Laughrey ruled in favor of Mark Toigo, an investor in Missouri’s medical marijuana market who resides in Pennsylvania, holding that the residency requirement violates the U.S. Constitution’s commerce clause and granting a preliminary injunction that restricts the State from enforcing the residency requirements.

At the center of the case is the requirement that Missouri licensed medical marijuana businesses are to be owned in majority by Missouri residents. The injunction granted by Judge Laughrey restricts the State from enforcing those residency requirements as they pertain to investment and ownership of medical marijuana licenses granted by the State.

This decision, in essence, kicks open the door to out-of-state investors and privately held companies.

While the state will still require background checks for ownership, thus limiting the ability for publicly traded entities to participate – the decision removes any barrier of ownership to individuals and privately held companies who may have interest in the Missouri medical marijuana market.

Toigo’s lawsuit, filed in December 2020, argued that the State of Missouri’s enforcement of the residency requirement is discriminatory and violates the Commerce Clause of the U.S. Constitution.

“The Residency Requirement, and the related state regulations, explicitly discriminates against residents of other states, and are thus precisely the type of state laws that are prohibited by the dormant Commerce Clause of the U.S. Constitution,” the suit reads.

Toigo is part of the ownership group of Organic Remedies, a multi-state operator with vertical licenses in Missouri and Pennsylvania. Because Toigo lives and works in Pennsylvania, he was restricted to less than fifty percent ownership in any Missouri licensed medical marijuana facility.

Toigo’s lawsuit alleged that the residency requirement, “limits Mr. Toigo’s economic opportunities in Missouri’s nascent marijuana industry,” and that he had been, “deprived of significant and valuable business opportunities.”

The Department may still appeal the decision.