States are increasingly involved in legal disputes related to cross-border cannabis distribution, with some suing over issues arising from how cannabis products move across state lines or how licensing and regulatory frameworks affect out-of-state businesses. These lawsuits often hinge on constitutional and regulatory conflicts between states’ cannabis laws and federal law, as well as disputes over licensing priorities and market access.
One prominent example involves New York, where the state’s cannabis regulators faced a lawsuit challenging their licensing system for adult-use cannabis dispensaries. New York’s system prioritized applicants who were residents, especially those from communities disproportionately harmed by cannabis prohibition, or who had low income or prior marijuana convictions. An out-of-state applicant sued, arguing that this prioritization violated the dormant Commerce Clause of the U.S. Constitution, which generally prohibits states from discriminating against out-of-state economic interests. The Second Circuit Court of Appeals agreed that New York’s licensing criteria unlawfully favored in-state applicants, throwing a wrench into the state’s cannabis licensing regime. This case highlights how states’ attempts to control cannabis markets within their borders can lead to legal challenges when they exclude or disadvantage out-of-state businesses[1].
Beyond licensing disputes, states also face challenges related to the broader issue of cannabis distribution across state lines. Because cannabis remains federally illegal, interstate commerce of cannabis is generally prohibited, creating a patchwork of state laws that complicate cross-border sales and transport. Some states have enacted laws or regulations that restrict or prohibit the shipment of cannabis products from other states, leading to tensions and potential lawsuits. For example, states with legalized cannabis markets may seek to protect their local businesses by limiting out-of-state competition, which can prompt legal challenges based on constitutional grounds or claims of unfair trade practices.
In addition to state-versus-state or state-versus-business lawsuits, there are also cases where cannabis businesses themselves engage in litigation over trademark rights and other commercial disputes. Federal courts have recently shown a willingness to hear cannabis-related cases despite the federal illegality of marijuana, rejecting defenses that cannabis businesses cannot be sued because their activities are illegal under federal law. This trend reflects a pragmatic approach by courts to address the complex realities of cannabis commerce, including disputes over branding and market competition that often cross state boundaries[2].
The legal landscape is further complicated by the fact that some states have very strict cannabis laws, including outright prohibition, while neighboring states may have fully legalized adult-use markets. For example, states like Indiana maintain strict prohibitions on possession, cultivation, sale, and distribution of marijuana, with harsh
