The Next Cannabis Supreme Court Case May Be About Licensing. The Real Stakes Could Be Retroactive Relief from 280E.

Our friends at Marijuana Moment reported this week on a new Congressional Research Service report examining a growing split among federal courts over cannabis and the Dormant Commerce Clause. On its face, the question is simple: can states give their own residents preferential treatment when issuing marijuana business licenses? The implications could be much larger.

The Congressional Research Service (CRS) concluded that the disagreement among federal appellate courts “likely increases the odds” that the Supreme Court eventually takes up the issue. The First and Second Circuits have concluded that the Dormant Commerce Clause applies to state-legal marijuana markets, while the Ninth Circuit recently reached the opposite conclusion.

What the Dormant Commerce Clause Actually Does

We have written about this before, but to be clear: the Constitution includes a Commerce Clause that gives Congress the authority to regulate commerce among the states. At the same time, the courts refer to what is known as the Dormant Commerce Clause, which limits the individual states' power to interfere with interstate commerce. The Dormant Commerce Clause is not a separate constitutional provision; it is implied from the Commerce Clause. For purposes of this article, the important point is that individual states cannot protect their own businesses by discriminating against out-of-state competitors.

That creates an unusual problem when the product involved is cannabis.

Two Circuits Say It Applies. One Says It Doesn't.

In Northeast Patients Group v. United Cannabis Patients and Caregivers of Maine, the First Circuit struck down Maine's requirement that officers and directors of medical marijuana dispensaries be Maine residents. The court rejected the argument that the Dormant Commerce Clause does not apply simply because marijuana is prohibited under federal law. Importantly, the court relied on Gonzales v. Raich, noting that marijuana is a fungible commodity with an established interstate market, even if that market has historically been illegal.

The Second Circuit reached a similar conclusion in Variscite NY Four v. New York State Cannabis Control Board. It held that federal prohibition did not give New York permission to favor its own residents, and concluded that Congress had not clearly authorized New York to enforce protectionist marijuana licensing laws. The court ultimately held that New York's preference for applicants with New York marijuana convictions was a protectionist measure that could not stand.

Then the Ninth Circuit went the other direction. In January, it held in Peridot Tree that the Dormant Commerce Clause does not require courts to protect interstate commerce in a marijuana market that Congress has prohibited. The court framed the question rather pointedly: would applying the Dormant Commerce Clause here effectively create an implied constitutional right to engage in illegal interstate commerce? The Ninth Circuit ultimately concluded that the doctrine need not be extended to facilitate interstate marijuana commerce that remains prohibited under federal law.

We now have federal appellate courts looking at essentially the same problem and reaching opposite conclusions. That is exactly the type of circuit split the Supreme Court may eventually have to resolve, and CRS now says the disagreement increases the odds that the Court will take up the issue.

The Case This Really Points Back To

This also brings us back to a case we have discussed before: Canna Provisions v. Bondi. The constitutional argument raised in that case is one of the positions we consider when amending returns and claiming refunds.

Canna Provisions attacked the federal government's authority from the opposite direction. Rather than arguing that states cannot interfere with interstate marijuana commerce, the plaintiffs argued that Congress should not be able to use the Commerce Clause to prohibit marijuana that is cultivated, manufactured, and sold entirely within a state-regulated market. Their real target was Gonzales v. Raich.

In Gonzales v. Raich, the Supreme Court, at a time when the Court was less receptive to states' rights arguments than it appears to be today, held in 2005 that Congress could apply the Controlled Substances Act even to marijuana cultivated and consumed entirely within California, because that federally illicit activity could affect the interstate marijuana market.

The Canna Provisions plaintiffs argued that the world Gonzales v. Raich was decided in no longer exists. State marijuana is now highly regulated, tracked, and distinguishable from the illicit market. Dozens of states have established legal cannabis programs. Congress and the executive branch have repeatedly tolerated or protected those programs. Their petition expressly asked the Supreme Court to reconsider whether Congress can continue prohibiting purely local, state-regulated cannabis under the Commerce Clause.

The Supreme Court declined to hear Canna Provisions in December 2025, so Gonzales v. Raich remains the law. But the constitutional question did not disappear.

Why the §280E Fight Is Watching This Closely

If anything, the Dormant Commerce Clause cases highlight how strange the current framework has become. The First and Second Circuits are essentially saying that marijuana is sufficiently part of interstate commerce that states cannot discriminate against out-of-state participants, while the Ninth Circuit says those protections should not apply because Congress has prohibited the interstate market altogether.

These cases do not themselves undermine Gonzales v. Raich or prove that Canna Provisions was right. In fact, Gonzales v. Raich has been used by courts to support applying the Dormant Commerce Clause. Their importance is that they create another path for the modern state-regulated cannabis market to get back in front of the Supreme Court.

If the Supreme Court takes one of these cases, it may have to decide how the Commerce Clause applies to a cannabis industry that looks very different from the one it considered in 2005. State markets are now highly regulated, state-licensed medical marijuana has moved to Schedule III, and those businesses now have a pathway toward DEA registration. CRS specifically identified rescheduling as a development that could change how future courts analyze these cases.

That could give the Court another opportunity to reconsider the reasoning in Gonzales v. Raich and, with it, the constitutional argument raised by Canna Provisions. That question matters enormously for §280E.

What's Actually at Stake: Money Already Paid

If the Supreme Court ultimately determines that the CSA cannot constitutionally prohibit marijuana cultivated and sold entirely within a state-authorized regulatory system, the argument against §280E becomes much stronger. If the underlying activity could not constitutionally be prohibited by federal law, then there is a serious question whether §280E's requirement that the activity be “prohibited by Federal law” was ever satisfied for those businesses.

At that point, the issue is no longer just about what happens going forward; it also raises the question of whether cannabis businesses should have paid taxes on phantom income in the past.

Supreme Court decisions interpreting federal law can apply retroactively to cases that are still open. In Harper v. Virginia Department of Taxation, the Court made clear that a new interpretation of federal law applies to cases that remain open on direct review. That does not reopen closed tax years, but businesses with timely amended returns, refund claims, or protective claims could still benefit.

That is why we continue to believe the fight over retroactive §280E relief is far from finished. Rescheduling addresses what happens going forward. The larger question is what happens to the §280E taxes businesses paid in prior years while operating legally under state regulatory systems.

The Dormant Commerce Clause cases do not answer the §280E question. Their importance is that they may bring the modern cannabis market back before the Supreme Court. If that gives the Court another reason to revisit Gonzales v. Raich, the constitutional argument raised by Canna Provisions could get another hearing.

If the Court eventually concludes that the CSA cannot constitutionally be applied to certain state-regulated cannabis activity, it could become one of the strongest arguments yet for retroactive relief from §280E.

This article is intended for informational purposes only and does not constitute legal, tax, or medical advice.