September 16, 2025
Maryland’s cannabis regulatory framework faced a full-force challenge in the U.S. Fourth Circuit Court of Appeals in September 2025, and the outcome is reverberating across the industry. This landmark ruling upheld key portions of Maryland's licensing scheme—especially its social equity provisions—even as courts elsewhere, most notably the Second Circuit in the high-profile Variscite case, struck down similar residency requirements. For cannabis entrepreneurs, investors, regulators, and social equity stakeholders, understanding the impact of the Fourth Circuit Maryland cannabis licensing Dormant Commerce Clause decision is urgent and essential.
Since federal cannabis prohibition persists, state markets have crafted their own rules—often including social equity licensing provisions aimed at righting the wrongs of past prohibition. But as the legal cannabis industry grows, courts are increasingly forced to reconcile these local preferences with the U.S. Constitution’s Dormant Commerce Clause (DCC), which prevents states from passing laws that discriminate against interstate commerce.
In Variscite NY One, Inc. v. New York State Office of Cannabis Management (2025), the Second Circuit struck down New York’s scheme giving license priority to individuals with prior, New York-specific cannabis convictions. The court found this residency-focused preference unconstitutional under the Dormant Commerce Clause (details). The ruling sent shockwaves through East Coast programs designed to harness local impact, warning regulators nationwide to reassess how they structure social equity initiatives.
Contrary to the Variscite outcome, the Fourth Circuit in September 2025 (see Daily Record; CRB Monitor) upheld Maryland’s social equity criteria. Maryland’s law gives licensing preference to business applicants from census tracts disproportionately impacted by prior cannabis enforcement. The court held that if these criteria are narrowly tailored to serve a legitimate purpose—remedying historical harm and promoting economic development—without overtly discriminating against out-of-state residents, they can survive DCC scrutiny. Importantly, the panel emphasized:
"A state's preference for those harmed by state or local enforcement, as distinct from general in-state residency requirements, may be justified if supported by robust evidence and clear legislative purpose."
This divergence has created a circuit split, heightening the chance of future Supreme Court review and creating policy uncertainty for states in the Second and Fourth Circuits as they contemplate new licensing rounds for 2026 and beyond.
Maryland continues to operate a tiered cannabis industry licensing system, including:
For 2025, Social Equity Applicants are defined as entities with at least 65% ownership and control by individuals who meet eligibility criteria—including residency in census tracts with high rates of cannabis enforcement prior to reform, and/or past personal or familial cannabis-related convictions in Maryland (OSE Guidance). The first round of each license type remains reserved exclusively for social equity applicants.
Applicants should prepare:
Maryland imposes strict compliance standards in key operational areas:
Maryland regulators have recently denied licenses due to post-application ownership changes and noncompliance, as reported by the Outlaw Report. Violations may result in fines, license suspension, or revocation. Compliance failures related to packaging, labeling, or diversion may also result in product recalls or bans from the state market.
Other states in the Fourth Circuit (like Virginia) and beyond are already considering the Maryland roadmap as they design their own 2026 license rounds. As the legal landscape evolves, both regulators and businesses should:
Need more help tracking rule changes, application deadlines, or building compliance protocols in Maryland or beyond? CannabisRegulations.ai delivers up-to-date regulatory intelligence, alerts, compliance tools, and expert resources for every U.S. cannabis market. Stay ahead—connect with us for guidance tailored to your next licensing move.
