Rhode Island Marijuana Retail License Lottery Halted by Federal Judge Over Residency Requirement
- A federal judge has temporarily blocked Rhode Island from holding a lottery for up to 24 new marijuana retail licenses, halting the state’s adult-use marijuana rollout.
- The injunction followed a lawsuit from out-of-state applicants challenging Rhode Island’s residency requirement for license holders, arguing it violates the U.S. Constitution’s Dormant Commerce and Equal Protection Clauses.
- The state had required majority ownership of marijuana businesses to be held by Rhode Island residents, which the judge indicated likely infringes on constitutional rights, leading to the suspension of the licensing process.
- The ruling adds uncertainty for 97 applicants who incurred expenses and secured locations, while Rhode Island’s adult-use market remains limited to eight dispensaries operating under a transitional system.)
A federal judge has temporarily blocked Rhode Island from moving forward with a lottery that was set to award up to 24 new marijuana retail licenses, delivering another setback to the state’s slow-moving adult-use rollout.
U.S. District Judge Melissa DuBose issued a preliminary injunction Wednesday after three prospective marijuana retailers from Florida and California challenged Rhode Island’s residency requirement for license holders. According to the lawsuit, the plaintiffs argued that the restriction unfairly discriminates against out-of-state applicants and runs afoul of the U.S. Constitution.
Rhode Island has required marijuana business ownership to remain primarily in the hands of in-state residents, even while allowing some outside investment. Under that framework, the majority owner of a licensed operation had to be a Rhode Island resident. The lawsuit argued that policy violates both the Dormant Commerce Clause and the Equal Protection Clause, and DuBose indicated the challengers are likely to succeed on the merits of their case.
As a result, the judge ordered the state to stop the lottery process for now.
The ruling creates new uncertainty for dozens of applicants who had been waiting for the state to finally issue licenses for recreational-only stores. Rhode Island legalized adult-use marijuana in 2022, but implementation has moved slowly. The Cannabis Control Commission, which is responsible for overseeing licensing and regulations, took significant time to get established and then spent roughly a year and a half developing rules for the new license round.
Applications were eventually accepted last year and were due in late December. In total, 97 applications were submitted. Many applicants had already secured locations, obtained local zoning approvals, and taken on significant expenses while waiting for the lottery to proceed. Some had reportedly been paying rent on storefronts for months in anticipation of the next phase.
DuBose noted in her ruling that the state may be able to reduce some of the harm to applicants by refunding fees or allowing current applications to be carried over into a future licensing round.
The decision lands amid broader frustration with Rhode Island’s marijuana rollout. In recent weeks, some applicants had already raised concerns that regulators might slow the process even more by releasing the 24 licenses in phases instead of selecting them all at once. Regulators have expressed concern that opening too many stores too quickly could put downward pressure on prices.
For now, Rhode Island’s adult-use market remains limited. Eight existing dispensaries are currently allowed to sell recreational marijuana under a transitional system that let former medical operators serve the adult-use market while the new licensing structure was being developed.
With the lottery now paused by court order, the timeline for expanding Rhode Island’s retail marijuana market has become even more uncertain.