The Fourth Circuit Court of Appeals ruled in favor of Maryland’s social equity licensing rules, affirming the denial of a preliminary injunction against a series of licensing lotteries that took place last year.
The circuit court declined to rule on the plaintiff’s claims that the U.S. Constitution’s dormant commerce clause applies to cannabis, avoiding a split with a decision from the Second Court of Appeals last month.
The plaintiff in Maryland, California resident Justyna Jensen, and her attorney Jeffrey Jensen argued that the state’s social equity requirements essentially restricted licenses to state residents. They also asked for a court injunction to halt Maryland’s cannabis licensing process.
The judge found that although social equity status based on college enrollment was confined to Maryland institutions, one does not have to be a resident of the state to attend college in Maryland.
“Assuming without deciding, for the sake of argument, that the Dormant Commerce Clause did govern the recreational marijuana market, Jensen’s claim would still fail for one glaring reason: the challenged in-state institution of higher education criterion is not discriminatory,” wrote Circuit Judge DeAndrea Gist Benjamin in a 14-page unanimous opinion.
The Sept. 2 ruling only applies to the lower court’s denial of a preliminary injunction. That case remains ongoing. The state filed a motion to dismiss on March 8, 2024, but the case was paused in November that year while the court waited on the appeal.
The state conducted its inaugural social equity license lottery on March 14, 2024, where 64 microbusinesses, 24 processors and 16 cultivators were selected, along with 70 dispensaries for 20 of the state’s 24 counties. The four remaining drawings for dispensaries were postponed due to Jensen’s lawsuit. They were eventually held on June 28 after the U.S. District Court of Maryland denied Jensen’s motion for a preliminary injunction.
Justyna Jensen sued the state in January 2024, alleging that the requirement for lottery applicants violated the U.S. Constitution’s dormant commerce clause. Specifically, she challenged the requirement to have attended a four-year institution of higher education in Maryland, for at least two years, where at least 40% of the individuals who attend are eligible for a Pell Grant.
Pell grants are generally awarded to households that have annual incomes of less than $30,000. Although Jensen did attend a school where over 40% of the students qualified for a Pell Grant, that school was not located in Maryland.
U.S. District Judge Brendan Hurson denied the injunction on Feb. 27, 2024.
DCC decision left ‘for another day’
Last month Jeffery Jensen won a similar case in the Second Circuit Court of Appeals. He was challenging New York’s licensing scheme, claiming that it prioritized state residents and that the dormant commerce clause applies to cannabis despite its illegal status at the federal level.
Rather than split with the Second Circuit, the Fourth Circuit avoided answering the question of whether the dormant commerce clause applies.
“We leave the question of whether the Dormant Commerce Clause applies to the marijuana market for another day. Our decision is strictly limited to whether the challenged criterion is discriminatory – which it is not,” wrote Benjamin in a footnote.
Aside from Maryland and New York, Jensen has similar pending litigation across the country.
In California, two district court judges have ruled the dormant commerce clause does not apply, sending the matter to the Ninth Circuit Court of Appeals.
Peridot Tree WA Inc. v. Washington State Liquor and Cannabis Control Board is also before the Ninth Circuit, after U.S. District Judge Tiffany Cartright dismissed the case. Oral arguments took place June 3, 2025.
U.S. District Judge Kimberly Mueller dismissed Peridot Tree Inc. v. City of Sacramento on Nov. 21, 2024, on the grounds that the dormant commerce clause does not apply to cannabis. Similarly, the Central U.S. District Court of California dismissed Variscite, Inc. v. City of Los Angeles on Feb. 4 this year.
Last year, Justyna Jensen sued Rhode Island regulators over the residency requirement in the state’s upcoming adult-use retail licensing process. That case is now in the First Circuit Circuit Court of Appeals after the lower court denied an injunction.
