Cannabis companies to appeal federal commerce clause lawsuit

By Steve Gelsi

Lawyer for plaintiffs said lawsuit is headed toward federal appeals court or possibly the U.S. Supreme Court

A group of cannabis companies plans to appeal a lawsuit to overturn a federal prohibition on cannabis because it restricts state-legal commerce, after a judge dismissed it.

Judge Mark G. Mastroianni of Massachusetts U.S. District Court on Monday dismissed the lawsuit on the grounds that he did not have the authority to re-set a Supreme Court precedent in its 2005 decision in the lawsuit Gonzalez v. Raich.

That 2005 decision, which was being challenged by a group of Massachusetts-based cannabis operators, affirmed that the U.S. Controlled Substances Act did not exceed the bounds of federal authority by criminalizing wholly-intrastate, small-scale cultivation and possession of cannabis for personal medical use, even in states where it is legal.

"While the complaint has alleged persuasive reasons for a reexaminationof the way the Controlled Substances Act (CSA) regulates marijuana, the relief sought is inconsistent with binding Supreme Court precedent and, therefore, beyond the authority of this court to grant," Mastroiani said.

The judge also said the plaintiffs in the case can pursue theirclaims and seek the attention of the U.S. Supreme Court, as well as promote the reclassification or removal of cannabis from the Controlled Substances Act.

Joshua Schiller, partner at Boies Schiller Flexner, told MarketWatch an appeal process had been expected in the case and that the decision by Mastroianni is speeding the process along.

The lawsuit - Canna Provisions Inc., Gyasi Sellers, Wiseacre Farm Inc. and Verano Holdings Corp. (VRNOF) versus U.S. Attorney General Merrick Garland - will now move to the First Circuit Court of Appeals and potentially continue to an appeal to the U.S. Supreme Court, he said.

The federal government filed the motion to dismiss the suit.

The plaintiffs plan to pursue their argument that federal law has changed since the Gonzalez decision and that the Controlled Substances Act restricts state-legal commerce.

The House passed the Rohrabacher-Blumenauer amendment in 2014 that prohibits the federal government from using federal money to prosecute individuals or companies under the Controlled Substances Act operating state-legal cannabis businesses.

Thirty-eight states now have programs that legalize cannabis within a regulatory framework of local enforcement.

The plaintiffs in the case filed their lawsuit last year against U.S. Attorney General Merrick Garland in U.S. federal court in Massachusetts in an attempt to overturn the federal prohibition of cannabis because it restricts state-legal commerce.

Sorters of the suit include Ascend Wellness Holdings (AAWH), TerrAscend Corp. (TSNDF), Green Thumb Industries Inc. (GTBIF), Eminence Capital and Poseidon Investment Management.

-Steve Gelsi

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07-02-24 1007ET

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