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Maine Is Sued in Federal Court Over Its Recreational Pot Residency Requirement

By Eric Volkman - Updated Mar 25, 2020 at 6:53PM

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The court action by private companies aims to allow dispensaries with out-of-state ownership to operate in Maine.

Will out-of-state operators be allowed to pile into Maine's recreational marijuana industry?

If a new lawsuit against the state is successful, the answer might be yes. Privately held dispensary operator Wellness and Pain Management Connection, and its affiliate Wellness Connection, have brought a suit in federal district court challenging Maine's requirement that majority ownership of recreational marijuana businesses is held by in-state residents.

The legal action specifically targets Kirsten Figueroa, commissioner of the state's Department of Administrative and Financial Services, and the department itself. Addressing language used on the department's website, the Wellness businesses claim that "[t]he purpose of the Residency Statute is to discriminate against non-residents." The pair is therefore asking the court to rule that the statute is in violation of the U.S. Constitution.

Gavel with marijuana leaf.

Image source: Getty Images.

Wellness and Pain Management Connection is a Delaware-registered company. It says that the vast majority of its stakeholders reside outside Maine.

Neither Figueroa nor her department have commented on the lawsuit.

Maine legalized recreational cannabis in 2016, but it has only recently begun licensing dispensaries selling this form of the drug.

Medical cannabis has been legal in the state for longer, which is why there are numerous retailers selling it. One is Wellness Connection, in Auburn, Maine.

Multistate operators (MSOs) in the cannabis industry are likely to keep an eye on how the companies' lawsuit develops. If the residency statute is struck down, it's possible that at least a few will try to enter the market. One suitable candidate is Curaleaf Holdings (CURLF -0.99%), headquartered in nearby Massachusetts. Curaleaf is Wellness' neighbor, operating a medical dispensary in Auburn.

In contrast to the broader stock market, Curaleaf shares sank on Wednesday, dropping by over 10%.

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