Cannabis’ illegality at the federal level has created opportunities for the states to shape the legal landscape and create rules designed to capture the economic benefits of the cannabis industry for themselves while protecting their citizens against potential social harms. However, state residency requirements, used by many states to meet these goals, have been subject to a recent flurry of challenges based on the dormant Commerce Clause of the U.S. Constitution. The constitutional battles may change the course of the future of the industry, even after any federal legalization occurs.
In states with residency requirements, lenders should be aware of these challenges either to prepare for an emerging national market or to understand the risks created for borrowers who may subsequently be out of compliance with state laws.