Residency‑Neutral, In‑State Educational Criteria in Cannabis Social‑Equity Licensing Do Not Discriminate Under the Dormant Commerce Clause

Commentary on Justyna Jensen v. Maryland Cannabis Administration, 4th Cir., Sept. 2, 2025 (Published)

Introduction

In a published decision with immediate significance for cannabis licensing and Dormant Commerce Clause doctrine, the Fourth Circuit affirmed the denial of a preliminary injunction sought by a California entrepreneur, Justyna Jensen, who challenged a component of Maryland’s social-equity licensing regime for adult-use cannabis. Jensen contended that Maryland’s criterion allowing “social equity applicant” status to individuals who, among other options, attended for at least two years a qualifying four-year institution “in the State” discriminated against non-residents in violation of the Dormant Commerce Clause. The court assumed without deciding that the Dormant Commerce Clause applies to the recreational cannabis market notwithstanding the federal Controlled Substances Act (CSA), but held that the challenged criterion is not discriminatory—either on its face or in practice. Because Jensen was unlikely to succeed on the merits, preliminary injunctive relief was properly denied.

The case pits an out-of-state would-be market entrant against Maryland’s newly created licensing framework aimed at remedying historical harms from the “war on drugs.” The decision clarifies an important line: residency preferences are one thing; residency-neutral, location-based eligibility criteria are another. The former often trigger Dormant Commerce Clause scrutiny; the latter, without more, do not.

Summary of the Judgment

• The Fourth Circuit affirmed the district court’s denial of a preliminary injunction against Maryland’s first-round social-equity cannabis licensing process.
• The panel held that the in-state higher-education attendance criterion does not discriminate against non-residents under the Dormant Commerce Clause because:
  • It does not require Maryland residency; and
  • Any person—resident or non-resident—can satisfy it by attending a qualifying Maryland institution for two years.
• The court distinguished residency preferences and point systems favoring residents, which other courts have enjoined, from Maryland’s residency-neutral, location-based criterion.
• The panel expressly left open whether the Dormant Commerce Clause governs markets (like recreational cannabis) that are illegal under federal law.
• Because Jensen failed to show a likelihood of success on the merits, the court did not need to address other preliminary injunction factors in depth. It also observed that Jensen waived Pike-balancing arguments by raising them only in reply, and in any event the criterion would survive because it applies equally to in-state and out-of-state interests.

Case Background

In 2023, following Maryland’s constitutional amendment legalizing adult-use cannabis, the state enacted the Cannabis Reform Act, creating the Maryland Cannabis Administration and an Office of Social Equity. The statute required the Administration to conduct outreach and designed a first round of licensing restricted to “social equity applicants,” defined to include those with specified ties to “disproportionately impacted areas,” or those who attended for at least two years a four-year institution “in the State” where at least 40% of students are Pell-eligible. Maryland contracted with a vendor to verify “social equity” status before applicants could enter a license lottery. Jensen, a California citizen, attempted to qualify based on attendance at California State University–Long Beach. Her verification was denied; she was never associated with a submitted application in round one.

Jensen sued under 42 U.S.C. § 1983, asserting that the in-state higher-education criterion discriminates against nonresidents in violation of the Dormant Commerce Clause, and sought to halt the licensing lottery. The district court denied her motion for a temporary restraining order and preliminary injunction. Jensen appealed under 28 U.S.C. § 1292(a)(1).

Issues Presented

• Does the Dormant Commerce Clause apply to state regulation of recreational cannabis markets despite federal illegality under the CSA?
• Is Maryland’s “in-state higher-education” social-equity criterion discriminatory against non-residents, either on its face or in practical effect, under the Dormant Commerce Clause?
• Did the district court abuse its discretion in denying preliminary injunctive relief based on Jensen’s failure to show likelihood of success on the merits?

Holdings

• The court assumed without deciding that the Dormant Commerce Clause applies to the recreational cannabis market.
• On the merits, the in-state higher-education criterion is not discriminatory against non-residents; it is residency-neutral and accessible to any applicant who attends a qualifying Maryland institution.
• Jensen failed to demonstrate a likelihood of success on her Dormant Commerce Clause claim; therefore, the denial of a preliminary injunction is affirmed.

Analysis

Precedents Cited and Their Role

• Gonzales v. Raich (2005): Provided federal backdrop—marijuana remains a Schedule I substance regulated by Congress under the Commerce Clause. The court cited Raich to situate cannabis within federal commerce power and the CSA, framing (but not resolving) the question whether Dormant Commerce Clause constraints apply to a federally illegal market.
• Foundational Dormant Commerce Clause cases:
  • Tennessee Wine & Spirits Retailers Ass’n v. Thomas (2019): Reiterated the Dormant Commerce Clause’s anti-discrimination core—state laws favoring in-state economic interests are highly suspect and must be narrowly tailored to legitimate local interests. The Fourth Circuit invokes this to anchor the anti-protectionism principle.
  • Dep’t of Revenue of Kentucky v. Davis (2008): Cited for the proposition that discriminatory state laws must be narrowly tailored to advance legitimate purposes.
  • National Pork Producers Council v. Ross (2023): Emphasized that the Dormant Commerce Clause’s “very core” is antidiscrimination, not a generalized extraterritoriality test. Supports the court’s first-step focus: is there discrimination?
  • United Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth. (2007): Supplied the operative definition of discrimination as differential treatment that benefits in-state and burdens out-of-state economic interests.
  • Yamaha Motor Corp. v. Jim’s Motorcycle (4th Cir. 2005), Brown v. Hovatter (4th Cir. 2009), Sandlands C&D LLC v. Horry County (4th Cir. 2013), McBurney v. Young (4th Cir. 2012): Set out the two-step Dormant Commerce Clause framework: (1) discrimination analysis; (2) if non-discriminatory, Pike balancing (invalidating only if the burden on interstate commerce is clearly excessive relative to local benefits).
  • Pike v. Bruce Church, Inc. (1970): The balancing test governing nondiscriminatory state regulations—invoked here primarily to note that Jensen waived any Pike arguments and, alternatively, would lose because the criterion applies equally to in-state and out-of-state actors.
  • Northern Virginia Hemp & Agric., LLC v. Virginia (4th Cir. 2025): Quoted for two points: the consequences of failing a single Winter factor and the principle that regulations applying equally to in-state and out-of-state interests do not offend the Dormant Commerce Clause.
• Preliminary injunction standards:
  • Winter v. NRDC (2008): The four-factor test; the plaintiff must show likelihood of success on the merits and irreparable harm, and that the balance of equities and public interest favor relief.
  • Pierce v. N.C. State Bd. of Elections (4th Cir. 2024), Leaders of a Beautiful Struggle v. Baltimore Police Dept. (4th Cir. 2021): Confirmed standards of review and the demanding nature of preliminary injunctions.
  • Vitkus v. Blinken (4th Cir. 2023): Appellate obligations when the district court addressed fewer than all Winter factors (not controlling here because the district court addressed all four).
• Distinguishing out-of-circuit cannabis licensing cases:
  • NPG, LLC v. City of Portland, Maine (D. Me. 2020): Enjoined a point-based system awarding extra points for residency. The Fourth Circuit emphasized that Maryland’s rule is unlike a residency preference.
  • Finch v. Treto (7th Cir. 2023): Addressed a point system that favored long-time Illinois residents—again, a residency preference unlike Maryland’s.
  • Peridot Tree, Inc. v. City of Sacramento (W.D. Wash. 2024): Involved a licensing program requiring city residency—facially discriminatory in a way Maryland’s criterion is not.
• Appellate practice:
  • United States v. McHan (4th Cir. 2004), Scott v. United States (4th Cir. 2003), Moore v. Equitrans, L.P. (4th Cir. 2022): The court may affirm on any ground supported by the record even if the district court relied on different reasoning.
  • Grayson O Co. v. Agadir Int’l (4th Cir. 2017), Brown v. Nucor (4th Cir. 2015): Waiver of arguments not raised in an opening brief; applied to Jensen’s belated Pike theory.

Legal Reasoning

The court began with the Winter/likelihood-of-success inquiry. It set out the standard two-step Dormant Commerce Clause analysis: determine whether the challenged law discriminates against interstate commerce; if not, proceed to Pike balancing. Critically, the panel “assumed without deciding” that the Dormant Commerce Clause applies to the recreational cannabis market—declining to enter the thorny and unresolved question of the Clause’s reach in a market illegal under federal law.

Turning to discrimination, the court emphasized that Maryland’s criterion does not draw lines based on residency. Rather, it allows “social equity” status if an applicant attended for at least two years a qualifying four-year institution located in Maryland with a high percentage of Pell-eligible students. The rule therefore:

• Does not require the applicant to be, or to have been, a Maryland resident;
• Is equally open to non-residents (they can attend a qualifying Maryland institution); and
• Confers no advantage on Maryland residents who did not attend a qualifying in-state institution.

The panel rejected Jensen’s “as-applied” theory that, in practice, the criterion favors Maryland residents because qualifying institutions primarily serve in-state students and non-residents often become Maryland residents after graduating. That argument hinged on speculation, not record evidence. The court refused to assume that student populations are predominantly in-state or that out-of-state alumni tend to become residents, and even if those empirical premises were true, the criterion remains residency-neutral: anyone can attend a Maryland school, and mere Maryland residency without such attendance does not confer eligibility.

Having found no discrimination, the court noted that Pike balancing would be the next step, but Jensen waived Pike arguments by raising them only in reply. In any event, the criterion would survive Pike because it applies equally to in-state and out-of-state interests, a hallmark of a regulation that does not offend the Dormant Commerce Clause. On this merits record, Jensen could not show a likelihood of success, and that single failing sufficed to deny preliminary relief.

Impact and Significance

This published Fourth Circuit opinion provides concrete guidance in an area rife with litigation: how to design social-equity criteria for cannabis licensing without violating the Dormant Commerce Clause.

• Clear distinction drawn:
  • Residency preferences or point systems that advantage residents are highly vulnerable under the Dormant Commerce Clause.
  • Residency-neutral, location-based criteria—like attending an institution located in the state—are not discriminatory if non-residents can satisfy them and residency alone does not confer benefits.
• Practical design implications for regulators:
  • Anchor social-equity criteria in experiences or characteristics (e.g., attendance at certain institutions; time spent in “disproportionately impacted areas”) rather than formal residency.
  • Ensure criteria are facially open to non-residents and avoid conferring benefits solely by virtue of state citizenship or residency duration.
  • If defending against “practical effect” discrimination claims, build and preserve a factual record showing equal accessibility to out-of-state applicants and the absence of protectionist intent.
• Litigation roadmap for challengers:
  • Challengers cannot rely on speculation about demographics; they will need robust evidence that a facially neutral criterion operates, in fact, to burden out-of-state interests relative to in-state actors.
  • Pike balancing claims should be raised in the opening brief and supported with evidence quantifying burdens on interstate commerce relative to the program’s local benefits.
• Unresolved question preserved:
  • The Fourth Circuit left open whether the Dormant Commerce Clause applies at all to a market deemed illegal by federal law. That question continues to divide lower courts and remains a potential candidate for future circuit or Supreme Court clarification.
• Procedural takeaway:
  • Because preliminary injunctions are extraordinary, the failure to demonstrate likely success on the merits will typically be dispositive. Plaintiffs seeking to halt time-sensitive licensing rounds face a high bar.

Complex Concepts Simplified

• Dormant Commerce Clause:
  • Though the Constitution explicitly grants Congress the power to regulate interstate commerce, courts infer a “dormant” limit on states from that grant. States may not enact protectionist measures that discriminate against or unduly burden interstate commerce.
• Discrimination vs. Neutral Regulation:
  • Discrimination means treating in-state and out-of-state economic interests differently in a way that benefits the former and burdens the latter. If a law is equally open to in-state and out-of-state actors, it is typically not discriminatory.
• Pike Balancing:
  • Even non-discriminatory laws can be invalid if the burden placed on interstate commerce is “clearly excessive” relative to the state’s legitimate local interests. This is a pragmatic balancing test, not strict scrutiny.
• Residency Preference vs. Location-Based Criterion:
  • A residency preference expressly favors residents (e.g., awarding points or eligibility because one is a resident). A location-based criterion ties eligibility to a location-related experience (e.g., attending a school in Maryland) and can be satisfied by residents and non-residents alike.
• Assume Without Deciding:
  • A court may resolve a case by assuming, for argument’s sake, that a contested legal principle applies, and then holding that the party still loses on other grounds. This leaves the contested principle undecided for another day.
• Preliminary Injunctions (Winter factors):
  • To get an injunction before trial, a party must show likely success on the merits, likely irreparable harm, that the balance of equities tips in their favor, and that an injunction serves the public interest. Failing any one factor is typically fatal.
• Waiver:
  • Arguments not raised in an opening appellate brief are usually deemed waived. Raising them for the first time in a reply brief is too late.

Conclusion

Jensen v. Maryland Cannabis Administration establishes a clear and practical rule in the Fourth Circuit: a residency-neutral, location-based social-equity criterion—here, attendance at qualifying in-state higher-education institutions—does not discriminate against non-residents under the Dormant Commerce Clause. The decision distinguishes Maryland’s approach from residency preferences and point systems that advantage state residents, which other courts have enjoined. It also underscores the evidentiary burden on challengers: suppositions about demographics or applicant trajectories are insufficient to convert a facially neutral rule into a de facto discriminatory one.

While the court left unresolved whether the Dormant Commerce Clause applies to recreational cannabis in light of federal illegality, its published opinion provides tangible guidance for states crafting social-equity licensing criteria and for litigants contesting them. For regulators, the path forward is to focus on neutral, experience-based criteria accessible to all applicants. For challengers, success will require concrete evidence of discriminatory treatment or clearly excessive burdens under Pike. Procedurally, the case also reiterates the demanding standard for preliminary injunctions: failure to show likely success on the merits will typically end the inquiry.

In short, the Fourth Circuit has carved out a principled, administrable boundary in the rapidly evolving law of cannabis licensing: residency is suspect; residency-neutral location criteria are not, absent proof of discriminatory effect.