MJBizMag January 2021 - 14

Trends&HotTopics | Jeff Smith
Have Residency Requirements
Worn Out Their Welcome?
M
ontana voters passed a
recreational marijuana initiative
on Election Day that will require
licensed operators to be state residents,
as is now the case with its medical
marijuana program.
In keeping this requirement,
Montana is a rare breed. Several
states have abandoned residency
requirements in recent years, and
similar mandates in other states are
being challenged as unconstitutional.
It remains to be seen whether
Montana's residency requirement will
face lawsuits as well.
But the issue raises questions about
whether residency requirements in
the marijuana industry eventually will
become a thing of the past.
Worthy Purpose, Mixed Results
The original purpose of residency
requirements in the marijuana
industry seemed worthy enough:
Advocates of the effort were
concerned about corporate takeovers
of the cannabis industry and believed
that residents-rather than out-ofstate
investors-should derive the
economic benefits of the nascent
sector.
The architects behind the regulations
also believed that residency requirements
would help curb illicit markets.
But as many states have found,
residency requirements can become
a rather onerous form of economic
protectionism and don't necessarily
repress illicit sales.
Instead, they can prevent the
industry from developing or growing
naturally by restricting the flow of capital.
Several states ditched residency
requirements as a result:
* Oregon, for example, initially
required majority control of marijuana
businesses by individuals
who had been residents for at
least two years. The state got rid
of those requirements in 2016.
* Colorado passed a law in 2019
that opened its marijuana industry
to out-of-state investors.
* An Idaho businessman is challenging
Washington state's residency
requirement in the courts.
* In Maine, legal action by an affiliate
of New York-based Acreage
Holdings prompted the state to
abandon a residency requirement
for adult-use licenses. The issue is
still being fought in the courts.
* Oklahoma, which otherwise is
a wide-open medical marijuana
market, is facing a legal challenge
to its two-year residency requirement
that allows nonresidents to
own only up to 25% of an MMJ
business.
New Priorities
Today, residency requirements arguably
are being supplanted by social equity
provisions as well as new license types
such as small-grower permits-measures
designed to try and ensure that minorities,
women and small businesses get a
fair slice of the licensing pie.
As many states have found, residency
requirements can become a
rather onerous form of economic
protectionism and don't necessarily
repress illicit sales. "
14 Marijuana Business Magazine | January 2021

MJBizMag January 2021

Table of Contents for the Digital Edition of MJBizMag January 2021

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