Following gangbuster sales in the back end of 2023, Maryland’s adult-use cannabis market entered an exclusive group of states in January when it was sued by a woman represented by California attorney Jeffrey Jensen for the state’s preference for in-state applicants.
Maryland is coming off a blockbuster market launch that saw $330 million in adult-use sales in 2023. The state opened its adult-use market on July 1 after voters legalized cannabis in November 2022. The first round of adult use sales came from the 96 medical dispensaries that were permitted to shift into hybrid models to serve the adult-use market.
The state is now preparing to open its adult-use market to new applicants. The first round of new adult-use licenses will be determined by a lottery that is only open to “social equity” applicants.
According to the Cannabis Reform Act, a social equity applicant must own or control 65% of the company. They are defined as someone who has either:
- Lived in a disproportionately impacted area for at least the five of past 10 years
- Attended a public school in a disproportionately impacted area for at least five years
- For at least two years, attended a four-year institution of higher education in Maryland where at least 40% of the individuals who attend are eligible for a Pell Grant
The application period closed on Dec. 12, 2023. The state received 1,708 applications for the social equity lottery, of which it will issue up to 179 licenses in total.
The MCA sent out a notice in January alerting applicants that the lottery had not yet been scheduled, and that it would have to wait until after the completion of any record reviews that came at the request of a failed applicant. The MCA anticipates notifying all applicants of their status by Feb. 12.
California applicant claims she qualifies under U.S. commerce clause
Attorney Jeffrey Jensen and Justyna Jensen are identified as a married couple in a 2019 application for a cannabis license in Pasadena, Calif. Jeffrey Jensen previously filed lawsuits against residency-based social equity standards in New York, Washington and California.
They seek to halt Maryland’s licensing process as well, which is already experiencing delays.
“Plaintiff satisfies all requirements for a social equity applicant except the unconstitutional Maryland residency requirement,” said the seven-page complaint filed by Justyna Jensen on Jan. 26 in the U.S. District Court of Maryland.
Justyna Jensen lives in California and attended a college where at least 40% of the student body were eligible for the Pell Grant, but that college was not located in Maryland. The state said she did not meet the criteria for social equity status because “out of state universities do not qualify,” according to the lawsuit.
Pell grants are generally awarded to households that have annual incomes of less than $30,000.
The Jensens argue that the U.S. dormant commerce clause precludes any state government from discriminating against the residents of other states, and that Maryland’s college requirement for social equity status does just that.
“All or nearly all students who attend college in Maryland will live in Maryland while school is in session. Moreover, Maryland residents are more likely than out-of-state residents to have attended college in Maryland for at least two years. Thus, the Maryland Code and Maryland Regulations facially discriminate against out-of-state residents in violation of the dormant Commerce Clause of the United States Constitution,” said the complaint. “Defendants violated Plaintiffs’ rights by depriving Plaintiff of the opportunity to participate in the lottery, in violation of the dormant Commerce Clause.”
A spokesperson for the MCA declined to comment on the lawsuit.
Jeffrey Jensen successfully halted New York’s roll-out of conditional adult-use retail dispensary licenses because it was reserved for applicants with a cannabis-related conviction in New York. Jensen represented a man from Michigan whose prior conviction was from his home state. State regulators ultimately settled the lawsuit, agreeing to grant the applicant a retail license in the Finger Lakes region of the state.
Jeffrey Jensen sued in Washington state and recently failed to obtain a restraining order against the state’s issuance of social equity licenses.
He also represented lawsuits in Los Angeles and Sacramento challenging those municipalities’ social equity licensing preference. Both of those cases are awaiting a ruling from the Ninth Circuit Court of Appeals.
