Another legal challenge threatens to throw RI's cannabis market into chaos. What to know.

Rhode Island faces a second legal challenge to a provision in its still-developing cannabis program that bans non-residents from owning a majority interest in any retail business.

John Kenney, a Florida resident, filed a lawsuit in U.S. District Court last month alleging the residency requirements written into Rhode Island’s two-year-old recreational cannabis law are unconstitutional because they impede interstate trade.

“The aforementioned residency requirements of the act explicitly discriminate against residents of other states and are thus precisely the type of state laws that are prohibited by the dormant Commerce Clause of the U.S. Constitution,” Kenney says in his lawsuit.

Lawsuit closely resembles one already filed by California woman

His claim echoes the legal argument made in May by Justyna Jensen of Beverly Hills, California , who along with her lawyer husband, Jeffrey Jensen, challenged Rhode Island’s cannabis program as they have in several other states with similar residency requirements.

Jensen last month asked a federal judge to issue a preliminary injunction halting Rhode Island’s Cannabis Control Commission from moving forward with drafting regulations for the future issuance of retail licenses.

U.S. District Judge Mary S. McElroy granted a request by the state attorney general’s office for more time – until July 22 – to respond to Jensen’s motion for preliminary injunction.

Going deeper: More on Kenney's lawsuit

Kenney is asking the federal court to strike down as unconstitutional Rhode Island’s residency requirement for license applicants and for those holding majority interests in any cannabis business.

Kenney’s Rhode Island lawyer Aaron L. Weisman told The Journal his client owns a cannabis dispensary in the Maryland area and has other cannabis connections in Southeastern New England.

He’s sees the Rhode Island market as a potential good investment and is legitimately interested in entering it, Weisman said; he has not filed similar lawsuits in other states.

But like Jensen, Kenney's lawsuit claims his plan to be a majority owner of a Rhode Island cannabis business is being illegally thwarted by Rhode Island law.

“The state of Rhode Island cannot show a legitimate local purpose for the residency requirement, because its self-evident purpose is to discriminate against non-residents and reserve, to Rhode Island licensees only, the enormous economic opportunities available for licensees," the suit reads.

Rhode Island's retail cannabis licensing off to a slow start

In 2022, Rhode Island lawmakers legalized the sale of recreational cannabis with the specific intention of helping local minority communities disproportionally hurt by the war on drugs.

The law required the new Cannabis Control Commission to, among other duties, write regulations for future issuance of at least 24 more retail licenses with stores geographically placed around the state. And a portion of those new licenses would be reserved for local so-called “social equity” applicants and store cooperative owners.

The residency requirements were designed to protect small, local entrepreneurs from major outside cannabis companies snatching up the new retail licenses.

But progress toward granting the licenses – or even choosing the process for how those licenses would be awarded – was moving slower than expected, even before these two legal challenges.

Appointments to the three-member cannabis commission didn’t come until May 2023, a year after passage of the law making recreational cannabis legal. And it took several months more to seat members of the commission’s advisory board.

By then, the expectation of awarding new retail licenses was pushed back until 2025.

Currently, marijuana for both recreational and medicinal purposes is sold in seven dispensaries in Rhode Island.

It’s unclear now what impact the two legal challenges will have on the program.

Similar legal challenges have delayed cannabis programs in several states, industry analysist Hirsh Jain, a Los Angeles-based lawyer and founder of the cannabis consulting firm Ananda Strategy, earlier told The Journal.

The lawsuits “have certainly caused states to stop and pause,” said Jain. “I can’t think of a state [that] has figured out the right way in light of these lawsuits – figuring out a way to evade these constitutional questions.”

In New York, a state that Rhode Island social-equity advocates often point to as an example, "huge swaths of their programs" have been invalidated and delayed because of a similar lawsuit, Jain said.

Contact Tom Mooney at: tmooney@providencejournal.com

This article originally appeared on The Providence Journal: Another legal challenge threatens to throw RI's cannabis market into chaos. What to know.