A federal New York appeals court heard arguments on Thursday from a California attorney who’s seeking to place an injunction on the Empire State’s cannabis dispensary licensing regime, which had already been grounded by a state court earlier in December.

The West Coast attorney, Jeffrey Jensen, argued to the U.S. Court of Appeals for the Second Circuit in Manhattan that New York’s Office of Cannabis Management should be enjoined from issuing licenses on grounds that the federal dormant commerce clause applies to cannabis.

Alexandria Twinem, an assistant solicitor general, countered that the dormant commerce clause doesn’t apply to cannabis, since Congress hasn’t allowed interstate commerce of the product.

Jensen said Congressional intent is clear since it’s acknowledged cannabis as a national market.

He said New York’s “extra priority” to applicants with convictions in New York, while sidelining those with convictions in other states, is unconstitutional.

The claimants in the case are Variscite NY Four and Variscite NY Five, of which Jensen is a minority owner, having partnered with social equity applicants whose cannabis convictions were in California.

At least one of his businesses, Variscite NY One, has secured a license through a settlement with the state.

New York created its Conditional Adult-Use Retail Dispensary program in September 2023.

Jensen said nothing in the program originally indicated that it would favor New Yorkers. He said it wasn’t until a month later when the state set forth its mock-up of the application program, that it was clear that the cannabis conviction had to be under New York law.

He accused the New York government of not giving enough credit to the time and effort it takes to find shareholders and form and organize a company.

“That was, in my view, remarkable speed that they acted with,” he said.

But one of the justices suggested Variscite’s harm was minimal since the out-of-state applicant would have had time to meet the requirements in time for the December 2023 application queue.

An injunction by the federal court would back New York regulators further into a corner, after a Dec. 12 preliminary injunction from an Albany trial court judge.

It enjoined the state from processing any CAURD license applications that hadn’t submitted proof of a secured location, with notice to a municipality, on or before Nov. 17, 2023.

New York’s oft-criticized licensing regime requires applicants to secure a location prior to issuance of a license.

The state court injunction has implications for the Variscite appeal, because it prevents the Office of Cannabis Management from processing Variscite’s application, since it hasn’t secured a location, and thus would only initially be able to receive a provisional license, Twinem said.

The state attorney further argued that Variscite’s appeal isn’t ripe in its present form.

Specifically, Twinem said, Variscite is 816th among the list of “extra priority” applicants, and given the injunction on the program, the company can’t yet make a claim for constitutional injury.

A federal appeals judge said in court “the real issue” to be decided was whether this is an appropriate time to speak about whether the dormant clause applies, an issue that he said has come up in multiple federal courts.