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Cannabis law continues to live in constitutional limbo. States like Washington and California have built robust, tightly regulated cannabis markets, while federal law still treats marijuana as contraband. That tension has now collided head‑on with one of the Constitution's most powerful doctrines: the Dormant Commerce Clause.
Just recently, in January 2026, the Ninth Circuit weighed in with a closely watched decision upholding Washington's cannabis residency requirements against a dormant Commerce Clause challenge. The case, Peridot Tree WA, Inc. v. Washington State Liquor & Cannabis Control Board et al., does more than resolve a licensing dispute. It tees up a fundamental question: Does the Constitution protect interstate commerce in a market Congress has made illegal?
What is the Dormant Commerce Clause?
The Constitution gives Congress the power to regulate interstate commerce. From that affirmative grant, the Supreme Court has long inferred a negative corollary: states generally may not enact laws that discriminate against or unduly burden interstate commerce, even when Congress is silent. This implied restriction is known as the Dormant Commerce Clause.
At its core, the doctrine is anti‑protectionist. States may not tilt the economic playing field to favor in‑state actors over out‑of‑state competitors. Laws that explicitly discriminate against interstate commerce are frequently per se invalid.
But the Dormant Commerce Clause is also controversial. It is judge‑made, not textually explicit, and the Supreme Court has repeatedly warned that courts must exercise "extreme caution" before using it to invalidate democratically enacted state laws. That caution loomed large in the Ninth Circuit's analysis.
Peridot Tree and the Ninth Circuit's holding
The challenge
Peridot Tree, a cannabis company owned by a Michigan resident, challenged cannabis licensing regimes in both Washington and Sacramento, California. In each jurisdiction, Peridot alleged it met all substantive licensing criteria except residency requirements that favored local or in‑state applicants.
Peridot argued that these residency rules were classic economic protectionism and therefore unconstitutional under the dormant Commerce Clause.
The Ninth Circuit's Answer: No Dormant Commerce Clause Protection. Therefore, the Ninth Circuit affirmed the lower court's dismissal of the lawsuits. Its holding was blunt: The dormant Commerce Clause does not apply to cannabis markets because marijuana remains illegal under federal law.
The court declined to extend a judge‑made constitutional doctrine to protect interstate commerce in a market that Congress has expressly prohibited. In the court's view, the "fundamental objective" of the dormant Commerce Clause—preserving a national market free from state protectionism—evaporates when Congress has decided that the national market should not exist at all.
In reaching that conclusion, the Ninth Circuit parted ways with a First Circuit decision and a Second Circuit decision, both of which held that state cannabis residency requirements violate the dormant Commerce Clause, despite the federal illegality of marijuana. The Ninth Circuit instead aligned itself with a growing body of district court decisions (and with dissents from other circuits) emphasizing that illegal markets are constitutionally different in kind.
Put differently: there is no implied constitutional right to engage in illegal interstate commerce according to the Ninth Circuit.
Federal developments: rescheduling and mixed signals
The federal government's posture on cannabis has grown increasingly contradictory, and we recently observed that it is more confusing than ever.
- Congress continues to classify marijuana as illegal under the CSA
- At the same time, Congress has repeatedly barred the Department of Justice from interfering with state medical marijuana programs.
- Federal enforcement has largely deprioritized cannabis.
President Trump's Executive Order
In December 2025, President Trump issued an executive order directing the Attorney General to complete the rule-making process to reschedule marijuana from Schedule I to Schedule III. While rescheduling would not legalize cannabis outright, we have explained that it would represent a dramatic shift in federal policy—acknowledging accepted medical use and reducing criminal severity.
The Ninth Circuit expressly addressed this development and found it irrelevant for now. Courts, the panel emphasized, must apply the law as it exists, not as it might exist after future political action.
What happens if Cannabis is rescheduled? A prediction
If marijuana is rescheduled to Schedule III, the constitutional landscape could change—but not automatically.
Short term
- Cannabis would remain federally regulated.
- Interstate cannabis commerce would still be unlawful absent congressional authorization.
- States would likely continue to defend residency requirements as valid exercises of police power.
Medium term
Once cannabis is no longer treated as a substance with "no accepted medical use," the Ninth Circuit's core rationale begins to weaken. Courts may be less willing to say that Congress has declared the entire national market illegitimate.
The most likely outcome is not an immediate invalidation of residency requirements even with rescheduling on the horizon. More concisely, there is unlikely to be major movement in the application of the dormant Commerce Clause to invalidate residence requirements absent an act of congress rectifying any cannabis all illegality in the markets.
From another perspective, if Congress continues to delay full legalization while tolerating state markets, it becomes more difficult to argue that cannabis is truly "outside" interstate commerce. At some point, constitutional doctrine may be forced to catch up with economic reality. Until then, residency requirements in the Ninth Circuit remain on solid footing.
Wrapping up
For more cannabis rescheduling insights, check out our free webinar this Thursday, January 15th.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
