Federal Appeals Court Rules Some Provisions of New York’s Social Equity Rules are Unconstitutional  

A federal appeals court in New York on Tuesday ruled that some of the state’s social equity rules for cannabis licenses are likely unconstitutional. In the 2-to-1 decision, judges on the Court of Appeals for the Second Circuit in Manhattan said that the rules, which exclude people with federal or out-of-state cannabis convictions from receiving priority, appeared to violate constitutional principles that prohibit states from favoring their own residents over those from other states.    

“Under traditional dormant Commerce Clause principles, New York’s prioritization of applicants with convictions under New York law is a protectionist measure that cannot stand.” — Circuit Judge Dennis Jacobs, Variscite NY Four, LLC, Variscite NY Five, LLC v. New York State Cannabis Control Board, New York State Office of Cannabis Management, Tremaine Wright, Felicia Reid, FKA Christopher Alexander, 8/12/25 

The case was brought by two out-of-state applicants who were denied priority status. The decision will have no immediate effect on licensing or on existing businesses in New York or in other states. The case was returned to the trial court for further proceedings. 

While the majority pointed out that “Congress has given New York no clear permission to enforce protectionist marijuana licensing laws,” Chief Judge Debra Ann Livingston, in her dissent, contended that the majority erred in its decision in determing the role Congress should have in state cannabis policy while cannabis remains outlawed federally.    

“Congress has the power to regulate some purely intrastate activity, this power derives from its authority “[t]o regulate Commerce . . . among the several States,” Livingston wrote. “As a result, in assessing whether the challenged aspects of New York’s licensing scheme aid Congress’s objective, we must focus on Congress’s ultimate, constitutionally authorized objective: “eliminating . . . interstate” marijuana transactions.” 

The ruling marks the first time that a federal circuit court has applied the dormant Commerce Clause doctrine to adult-use cannabis markets.