The Missouri Department of Health and Senior Services (DHSS) decided to forgo appealing the ruling, announcing Tuesday that it had reached a settlement with the jilted applicant to end the litigation and award medical marijuana cultivation licenses (Getty Images).
A federal judge last week blocked Missouri from enforcing a requirement that medical marijuana licenses go to businesses owned by residents of the state.
U.S. District Judge Nanette Laughrey ruled that the residency requirement violates the U.S. Constitution’s commerce clause.
A constitutional amendment approved by voters in 2018 that legalized medical marijuana requires facilities to be “majority owned by natural persons who have been citizens of the state of Missouri for at least one year prior to the application.”
Mark Toigo, a marijuana investor from Pennsylvania and minority owner in a Missouri business awarded several licenses, filed a lawsuit last year to overturn that requirement.
Toigo argues in his lawsuit that Missouri’s medical marijuana market is expected to reach retail sales of $175 million to $275 million a year. But because of the residency rules he is prohibited from investing more money into any Missouri company if it increases his ownership stakes above 49 percent.
The requirement, the lawsuit says, “limits Mr. Toigo’s economic opportunities in Missouri’s nascent marijuana industry.”
The state justified the residency requirement on the idea that the Department of Health and Senior Services can only investigate the backgrounds of individuals who have lived in Missouri for at least a year, Laughry wrote.
But the judge dismissed the logic of that argument, writing in her ruling that an applicant could “rack up an extensive criminal history and record of financial misdeeds in Kansas, move to Missouri, and one year and one day later apply for a license to operate a medical marijuana facility. It is unexplained how the durational residency requirement would aid DHSS in uncovering this applicant’s presumed ineligibility in this circumstance.”
The public interest is best served by “the protection of Toigo’s constitutional right to fully participate in the medical marijuana business in Missouri on the same footing as a Missouri resident,” Laughrey wrote, “a right that is likely being violated by the state’s durational residency requirement.”
Lisa Cox, spokeswoman for DHSS, declined to comment on the ruling or whether the state would appeal.
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