The state’s biggest city has put its plan to issue recreational marijuana retail licenses on hold after a federal judge ruled that Portland’s licensing system unfairly discriminated against out-of-state applicants who want to participate in Maine’s new recreational cannabis industry.

That makes it highly unlikely that Portland, the city that handed legalization advocates their 2016 referendum victory, will have any shops able to sell recreational marijuana when Maine launches its adult-use market on Oct. 9. Since it was not planning to even start scoring retail applications until Sept. 1, Portland might not have made the deadline even before the judge’s decision.

Protesters stand along Congress Street outside of Wellness Connection in June to protest the business’s legal efforts to push Portland to allow out-of-state companies equal access to the city’s recreational marijuana industry. Brianna Soukup/Staff Photographer

The city learned of its legal setback Friday, when Wellness Connection of Maine obtained a temporary restraining order that prohibits Portland from giving Mainers preferential treatment when deciding who will land one of the 20 marijuana retail licenses that it planned to award in its first round of licensing, which was to have begun next month.

“The court’s decision will delay the award of any retail licenses,” said city spokeswoman Dena Libner on Monday.

Wellness had argued, and U.S. District Judge Nancy Torresen eventually agreed, that Portland’s residency preference violates the interstate commerce clause of the U.S. Constitution, which prohibits discrimination against out-of-state residents or corporations. Wellness is owned by High Street Capital of Delaware.

Wellness had filed a lawsuit against the state’s residency requirement on the same grounds in March. In May, the state struck a deal with Wellness, agreeing that it would not enforce that part of the Marijuana Legalization Act if Wellness would agree to drop its suit. But the court never got a chance to rule on the constitutionality.

A medical marijuana group, Maine Cannabis Coalition, is in court now trying to force Maine to enforce the residency requirement.

The city said Wellness was not harmed by the city’s scoring matrix because the points system did not bar out-of-state applicants from getting a license. Wellness could earn points in other areas, it argued. And even if it didn’t get a license this time, it could apply in a future round and could continue earning money selling medical marijuana at its flagship Portland dispensary.

The judge argued that depriving an out-of-state company of “equal footing” at the launch of a new market when customers were still establishing commercial allegiances was discriminatory, and it noted that a 250-foot zoning buffer could block Wellness from a recreational license in future rounds if a store opened nearby in the first round.

“Although the Plaintiffs have not been denied a license, their alleged injury is not the denial itself but the disadvantage they face in obtaining a license due to the city’s points matrix,” Torresen wrote in a 27-page decision issued Friday. “This injury is not conjectural or speculative.”

Portland also argued Wellness couldn’t use the Constitution as a shield because marijuana itself is a federally illegal drug. That philosophical defense of the city’s points matrix had caught the eye of national marijuana companies and their lawyers, because no court has yet ruled on whether marijuana would enjoy the same commerce protections as other industries.

Torresen’s ruling made her position on this closely watched point very clear: “I am unpersuaded that the city can legalize and promote marijuana sales on the one hand, while simultaneously labeling marijuana as contraband in order to justify discrimination against nonresidents who seek to participate in the market.”

Wellness refused to comment on the court ruling. Despite its Delaware origins, it is Maine’s largest marijuana company, holding four of the state’s eight medical marijuana dispensary licenses, including its flagship location on Congress Street in Portland. It already has received a conditional state license to open a recreational retail store in Portland.

The city hasn’t yet decided if it will appeal the decision, amend the scoring matrix, or possibly scrap it altogether. The matrix was about more than just residency, giving socially or economically disadvantaged applicants, those with experience running a closely regulated business and medical marijuana caregivers preference points, too, among others.

Many would-be retail store operators have pushed for Portland to eliminate the cap on recreational shops, arguing that it would benefit consumers to allow the free market to flourish, making it more likely that prices would remain competitive and give everyone who wants a shot at making a living in Maine’s newest industry the same chance.

Last month, a group of marijuana activists filed a petition to force the city’s retail license cap to a referendum in November.

“If the city can’t give Mainers any protection, the least they can do is give them their shot,” said David Boyer, former state director of the Marijuana Policy Project and the campaign manager of the 2016 legalization initiative. “The best way to do that is to lift the cap altogether and let the free market do its thing.”

If the matrix’s residency preference discriminates against out-of-state companies, then its other preferences, such as having $150,000 in the bank or previous business experience, are equally discriminatory against small businesses, said Mark Barnett, a local coffee shop owner, medical marijuana caregiver and founder of the Maine Craft Cannabis Association.

“Giant corporations are almost always likely to get their way, but it’s up to us as a community to earn our customers in the face of their overwhelming advantages,” Barnett said. “I would encourage Portland voters to go to the booth this year and reject the elitism of the City Council’s ordinance, especially now that the superficial ‘trade-off’ has been removed.”

During the year it spent researching and crafting its marijuana ordinance, however, city leaders made it clear they didn’t want Portland to rush into recreational marijuana. Cap supporters worried an unlimited number of licenses would flood the market and lead to high business failure rates, which would hurt business operators and their host neighborhoods.

Now, the city needs time to regroup, consult with the City Council and consider its next steps, according to Libner.

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