A U.S. appeals court ruling last Friday (January 2) added fresh legal uncertainty to the regulated cannabis landscape, with potential implications for adjacent nicotine and tobacco industries. The Ninth Circuit Court of Appeals held that the dormant commerce clause does not apply to state-legal cannabis markets because marijuana remains illegal under federal law. The decision allows states within the Ninth Circuit to maintain residency-based licensing and other local protectionist measures, and directly conflicts with earlier rulings from the First Circuit (2022) and Second Circuit (2025), which extended constitutional commerce protections to legal cannabis despite federal prohibition—creating a clear circuit split.

The case challenged residency requirements for retail marijuana licenses in Washington State and Sacramento, California, brought by an out-of-state applicant who argued the rules unfairly favored locals. Writing for the court, Judge Daniel A. Bress said federal courts are not required to “inaugurate free trade” in a market Congress has deemed illegal under the Controlled Substances Act. While the ruling strengthens state and local control—often tied to social equity frameworks—it increases regulatory fragmentation across the U.S., underscoring the uneven legal footing of cannabis compared with federally lawful tobacco and nicotine products and raising the likelihood of eventual U.S. Supreme Court review.