Ninth Circuit Says the Dormant Commerce Clause Doesn’t Apply to Cannabis Licenses — Even Though Raich Said Marijuana Is Interstate Commerce (Enough to Criminalize)

States and municipalities keep acting like cannabis sits in some constitutional no-man’s-land where they can write any residency barrier they want and the Constitution somehow doesn’t count.

The Ninth Circuit just gave that instinct a major assist.

In Peridot Tree WA, Inc. v. Washington State Liquor & Cannabis Control Board (consolidated with a Sacramento CORE licensing challenge), the Ninth Circuit held that the Dormant Commerce Clause (DCC) does not apply to state/local cannabis dispensary residency requirements because marijuana remains illegal under the federal Controlled Substances Act.

That’s a direct split with the First and Second Circuits, which have treated cannabis like any other market for DCC purposes: if you discriminate against out-of-staters, you’re in constitutional trouble unless Congress clearly says otherwise.

I’m not a fan of the Ninth Circuit’s approach—and the reason comes down to a problem the court doesn’t confront head-on:

You can’t tell me marijuana is “commerce” enough for Congress to regulate and ban under Article I and the CSA, and then tell me it’s not “commerce” enough for the anti-protectionism rules of the DCC to bite when states hand out licenses.

That’s where Gonzales v. Raich matters.

Quick recap: what Peridot actually did

The schemes:

• Sacramento reserved dispensary permits for CORE equity classifications that required being a current or former Sacramento resident (with additional equity criteria).
• Washington required that at least 51% ownership/control be held by Washington residents (six months), plus additional equity criteria.

The claim: these are classic protectionist residency barriers that discriminate against out-of-state competitors under the Dormant Commerce Clause.

The Ninth Circuit’s threshold move: it never analyzed whether the rules were discriminatory (they are). Instead, it held the DCC “does not apply here” because applying it would “extend” dormant Commerce Clause doctrine “to interstate commerce in a drug market that Congress has declared illegal,” and courts must proceed with “extreme caution.”

The key move (and the category error): treating DCC as a “right to sell weed”

The Ninth Circuit framed the case like this:

“Is there, in effect, an implied constitutional right to engage in illegal interstate commerce?”

That framing does a lot of work—but it’s a misframe.

The Dormant Commerce Clause is not a “right to sell marijuana.” It’s a structural rule against state economic protectionism—against states handing out economic opportunity based on state lines.

A state can ban cannabis entirely if it wants. That’s the state saying: “no market.”

But once the state chooses to create a licensed market—and monetize it—there’s a real constitutional question whether it can then say:

“Out-of-state dollars are welcome. Out-of-state competitors are not.”

That’s not “public health.” That’s protectionism.

Here’s why Raich is the elephant in the room

If you want to understand why Peridot feels backward, go back to Gonzales v. Raich (2005)—the Supreme Court case that upheld Congress’s power to apply the CSA even to intrAstate, noncommercial medical marijuana grown and used in compliance with California law. 

What Raich held (and why)

In the Raich opinion, the Court explains that:

• Congress built the CSA as a comprehensive regulatory system to control controlled substances and combat interstate trafficking. 
• Congress can regulate purely local activity if it is part of an economic “class of activities” that, in the aggregate, has a substantial effect on interstate commerce.
• And the Court explicitly analogized homegrown marijuana to homegrown wheat in Wickard v. Filburn (yes, of ConLaw 101 fame), applying the same “aggregation” logic: even if one person’s conduct is small, leaving that class unregulated would undercut federal regulation of the interstate market.

The Raich decision is unusually blunt about the economic-market premise:

• it describes marijuana as a fungible commodity,
• for which there is “an established, and lucrative, interstate market,” and
• says prohibiting intrastate possession/manufacture is a rational means of regulating commerce in the product.

Then the Court makes the point that should haunt Peridot:

the wheat market is lawful, the marijuana market is unlawful — “This difference, however, is of no constitutional import.” 

That’s not a DCC case, but it’s a foundational Commerce Clause statement: illegality doesn’t make commerce disappear.

The irony Peridot creates

Raich says Congress can regulate your backyard cannabis (even if noncommercial) because, in the aggregate, it affects the national market.

Peridot says the Dormant Commerce Clause shouldn’t apply because Congress outlawed the national market.

Those positions don’t sit comfortably together.

If cannabis activity is sufficiently “commerce among the several States” to justify federal criminal law reaching intrastate cultivation, then it is at least coherent to treat cannabis licensing—allocation of valuable economic rights—as commerce for purposes of the Constitution’s anti-protectionism rules.

Or put differently:

Commerce Clause breadth is not something lower courts get to narrow when it becomes inconvenient.

And “National Pork Producers” doesn’t rescue the Ninth Circuit (it cuts the other way)

The Ninth Circuit leans on National Pork Producers Council v. Ross for the proposition that “extreme caution” is warranted before courts deploy implied dormant Commerce Clause power.

Fair enough—Pork Producers is the Court’s latest big DCC decision.

But Pork Producers also opens by reaffirming something the Ninth Circuit should not be forgetting in a case about facial residency discrimination:

“The antidiscrimination principle lies at the ‘very core’ of the Court’s dormant Commerce Clause jurisprudence.”

And the reason Pork Producers preached “extreme caution” is that the petitioners in that case disclaimed discrimination and asked the Court to expand doctrine into newer territory (extraterritoriality and aggressive Pike balancing).

Peridot is not that. This is not a weird “practical effects” spillover case. It’s the classic DCC fact pattern:

• a state or city
• hands out licenses for a regulated market
• and conditions eligibility on residency (or gives residents priority).

That’s the “core” DCC problem.

So using Pork Producers caution language to avoid applying the core anti-discrimination principle looks less like judicial modesty and more like judicial abdication.

The protectionism problem that everyone pretends not to see

Here’s the real-world part: most states don’t restrict retail sales to residents. They restrict sales to adults, not to locals.

So a state can (and often does) set up a market that predictably captures:

• out-of-state consumers,
• out-of-state capital,
• out-of-state services (management, compliance, tech, branding),
• and yes, plenty of cross-border demand.

But then it can also say: ownership must be local.

That’s not “keeping commerce intrastate.” That’s taking the upside of a porous border economy while excluding out-of-state competition on the supply side.

If the DCC is meant to prevent states from “building up domestic commerce” by burdening the “industry and business of other States,” this is exactly the kind of behavior it’s supposed to police.

If true, even alcohol doesn’t get this kind of protectionist pass

In alcohol, states have the Twenty-First Amendment in the background. Yet in Tennessee Wine & Spirits Retailers Assn. v. Thomas, the Supreme Court still invalidated Tennessee’s durational residency requirements for retail liquor licensing because the Commerce Clause “by its own force restricts state protectionism.”

So alcohol is constitutionally special, and discrimination still loses.

Cannabis has no Twenty-First Amendment.

And Peridot effectively says cannabis regulators may have more room to impose state-line favoritism precisely because cannabis is federally illegal.

That inversion should make anyone who cares about constitutional structure uneasy.

Equity programs are important — but residency discrimination is a blunt (and risky) tool

This is not an anti-equity argument.

It’s a “don’t use state-line discrimination as your equity mechanism” argument.

Equity goals can be designed in ways that target harm without turning licenses into local-only franchises, including:

• conviction-based or family-impact criteria (not limited to in-state convictions),
• income and wealth criteria,
• geography-of-impact criteria tied to historic residence (including prior residence),
• community benefit and hiring requirements,
• fee waivers and financing programs that expand access without excluding competitors by residency.

Residency is the easiest proxy. It’s also the most constitutionally radioactive.

Bottom line

Raich treated marijuana as commerce enough for Congress to reach down into intrastate activity and criminalize it because of its interstate market effects.

Peridot treats that same market as too “illegal” for the Dormant Commerce Clause to restrain state protectionism.

If we’re going to be serious about constitutional doctrine, those ideas don’t harmonize. And when a state invites the economic benefits of cannabis commerce, it shouldn’t get to slam the door on out-of-state competition through residency requirements without an unmistakable congressional green light.

That’s not “judicial activism.” That’s the Constitution doing what it’s supposed to do: keeping states from rigging markets for locals.