Kenneth Gay Lost in Washington and Sacramento. On September 15, He Took the Fight to the Supreme Court.

Kenneth Gay's company checked almost every box Sacramento asked for. The city's CORE program set aside ten of its forty dispensary permits for applicants who could show the right income history and the right record of cannabis arrests or convictions in their past, the kind of applicant the city had decided its licensing system owed something to. Peridot Tree, Inc. qualified on the criteria that mattered, with one exception. Two of the five CORE classifications were reserved for a current or former resident of the City of Sacramento, and Gay lives in Michigan. (S1, S2)

So he sued. Then he filed a nearly identical suit against the Washington State Liquor and Cannabis Board, which has required since 2015 that license applicants, and every member, governor or agent of an applicant entity, have resided in Washington for at least six months. Two district courts threw both cases out on the same reasoning: the Constitution's dormant Commerce Clause protects interstate markets, and Congress has not authorized an interstate market in marijuana. A three-judge Ninth Circuit panel consolidated the appeals and agreed. On January 2, 2026, Judges Johnnie B. Rawlinson, Daniel A. Bress and Patrick J. Bumatay held that the doctrine "need not be extended to facilitate interstate commerce that is illegal under federal law." (S2, S3, S4)

On September 15, the case reached the Supreme Court's docket as number 26-343, with Chad Eric DeVeaux of Bartko Pavia LLP in San Francisco as counsel of record. The petition's argument fits on a line: the Ninth Circuit has it backwards, and federal illegality does not authorize discrimination. (S5, S6)

If the justices take it, the case decides who is allowed to own a cannabis business in America. Every state that built its market on the premise that its licenses belong to its own residents, and every city that reserved permits for people its own drug enforcement harmed, would be arguing in the same briefing schedule. The question has been sitting one step below the Court for four years, and it arrives at the precise moment the reasoning underneath it has started to come apart.

The First Circuit went first. In August 2022, in Northeast Patients Group v. United Cannabis Patients and Caregivers of Maine, it struck down a provision of the Maine Medical Marijuana Act requiring that every officer and director of a licensed dispensary be a Maine resident. The court would not accept federal prohibition as a defense. "Nothing on the face of the CSA purports to bless interstate discrimination in the market for medical marijuana that continues to operate even in the face of the CSA," the panel wrote, adding that a congressional exercise of the commerce power "can never, merely by being in place, displace the dormant Commerce Clause." (S7, S8)

The Second Circuit reached the same place in Variscite NY 4 v. New York State Cannabis Control Board, splitting 2-1 on a preliminary injunction and finding New York's licensing scheme likely unconstitutional. Its reasoning was the sharper of the two: Congress disapproving of a market is not the same thing as Congress approving protectionism inside it, and if Congress ever does legalize, a nation of walled-off state markets will be the wreckage left behind. (S9)

The Ninth Circuit looked at the same doctrine and declined. The dormant Commerce Clause is judge-made, the panel reasoned, an inference drawn from the Commerce Clause rather than a text Congress wrote, and a judge-made rule should not be stretched to protect trafficking in a Schedule I substance. That is a defensible position. It is also, since April, resting on a fact that is no longer true.

“Federal illegality does not authorize discrimination.”

— Petition for a writ of certiorari, Peridot Tree WA, Inc. v. Washington State Liquor and Cannabis Board, No. 26-343

The premise the Ninth Circuit relied on was that cannabis is contraband under the Controlled Substances Act, full stop. In April 2026 the Justice Department moved marijuana to Schedule III for medical and FDA-approved purposes, and in September the D.C. Circuit refused to stay that move while challenges proceed. A Schedule III substance is not a prohibited market. It is a regulated one, which is exactly the category of commerce the dormant Commerce Clause was built to police.

Elijah Hartman of Harris Sliwoski, writing on the split, made the point plainly: the Ninth Circuit's rationale weakens if cannabis is rescheduled. His conclusion was that Congress, not the courts, has to authorize interstate cannabis commerce, and that until it does, courts applying current law will keep upholding residency rules. Alexander G. Malyshev and Sarah H. Ganley of Carter Ledyard & Milburn, who have tracked the doctrine through all three circuits, framed the January decision as the moment the split became unavoidable. (S6, S10)

Washington's side of the argument has not been quiet either. Tera M. Heintz, the state's deputy solicitor general, defended the residency rule through the district court and the appeal, and the state's position has consistently been that a market Congress has criminalized is not a market the Constitution obliges Washington to open to Michigan. Jeffrey M. Jensen of Beverly Hills and Christian Kernkamp of Los Angeles carried Gay's cases at the trial level before DeVeaux took the petition. (S3)

This is where the case stops being a clean story about free markets. The Sacramento provision Gay challenged is not a protectionist scheme dressed up in civic language. It is a social-equity carve-out, ten permits out of forty, written for people with cannabis convictions on their records in a city that put them there. Strike the residency element and the carve-out has no mechanism left. The same is true in New York, where the Second Circuit ruling landed on a licensing round explicitly designed around justice-involved New Yorkers.

Operators who favor Gay's position have a real answer to that, and it is not a cynical one. Residency rules have not produced thriving equity markets. They have produced license-holders with no capital, predatory management agreements, and a long list of state programs, New York's among them, that spent years in litigation while the shops that were supposed to open did not. Opening ownership to out-of-state capital is, in that reading, the thing that would actually let an equity licensee build something.

Operators on the other side answer that out-of-state capital is precisely what hollowed the licensees out in the first place, and that the multistate operators who would benefit most from a ruling for Gay are the same companies that have consolidated every market they have entered.

Rhode Island has already run the experiment. A federal judge blocked the state's retail license lottery while a dormant Commerce Clause challenge to its majority-Rhode-Islander ownership rule was pending, and on June 10, 2026 Governor Dan McKee signed bills that stripped the residency provision out, voided the original application round and sent the Cannabis Control Commission back to a fresh window in August. Applicants who had paid fees and built businesses around the old criteria got refunds and a restart. That is the practical shape of a ruling for Gay: not an abstract constitutional correction, but a licensing round thrown out and rebuilt, in every state that has one. (S11, S12)

1. Respondents' briefs in opposition are due at the Supreme Court on the clerk's ordinary schedule; Washington and Sacramento each have to decide whether to defend the Ninth Circuit's reasoning or its result.
2. The justices' first conference on the petition determines whether 26-343 is relisted, denied or granted; a relist is the signal worth watching.
3. The D.C. Circuit's merits schedule on the Schedule III challenges will either harden or unsettle the rescheduling premise the petition leans on.
4. Any state that amends a residency requirement before the Court acts effectively concedes the point and may moot its own exposure.

The Court grants a small fraction of the petitions it receives, and a clean, acknowledged circuit split is one of the few things that reliably moves that number. This one is clean. Three federal appellate courts have answered the same constitutional question three different ways, two states have licensing regimes that are unconstitutional in Boston and New York and lawful in Seattle, and the substance at the center of it changed schedules five months ago.

Kenneth Gay still does not hold a cannabis license in Washington or in Sacramento. He has spent four years and two federal appeals failing to get one, and the thing he is now asking nine justices to do is tell forty-odd state governments that the way they decided who gets to sell cannabis was never theirs to decide. Whether the Court takes that up will be settled in a one-line order on a Monday morning.

Keep Reading

Policy & Compliance

Two Pollsters, Six Weeks Apart, Disagree by 16 Points on Whether Massachusetts Will Ban Its Own Cannabis Stores.

UNH has Question 8 losing 71-24. UMass Amherst had it 55-33 in August. The measure needs a simple majority on November 3, and the side trying to close a $1.65 billion market is outspending the side defending it two to one.

By Cannabis Inc, Editorial Staff·7 min read

Policy & Compliance

Three Days Before He Lost in the Nebraska Supreme Court, Mike Hilgers Subpoenaed a Dispensary in Colorado.

Peak Dispensary sits on Railroad Street in Sedgwick, a half-hour from the state line. Nebraska's attorney general wants the home addresses of everyone who has ever worked there, and has not said which law he thinks was broken.

By Cannabis Inc, Editorial Staff·7 min read