The Supreme Court is asked to decide whether cannabis licenses can favor residents. The USVI's 51 percent ownership rule turns on the same question

As of September 18, 2026. A petition filed with the Supreme Court on September 10 asks whether states and cities may reserve cannabis licenses for their own residents. The case is Peridot Tree WA, Inc. v. Washington State Liquor and Cannabis Control Board. Responses were due October 15.

Update, October 8, 2026: The Court extended the deadline for responses to December 4, 2026, at the respondents’ request.

The question presented runs one sentence:

Whether the dormant Commerce Clause’s nondiscrimination principle applies to state and municipal cannabis-licensing schemes.

The territory has a rule of exactly that kind, and its second-round license window closed five days after the petition was filed.

What was filed

The petitioners are Peridot Tree WA, Inc., a Washington corporation, and Peridot Tree, Inc., a California corporation, together with Kenneth Gay, whom Marijuana Moment identifies as a Michigan resident. Both companies were denied cannabis licenses on residency grounds, one by the Washington State Liquor and Cannabis Control Board and one by the City of Sacramento. The two cases were consolidated on appeal.

The ruling under review is the Ninth Circuit’s January 2, 2026 judgment, which held that the dormant Commerce Clause does not protect interstate commerce in a market Congress has made illegal. The Ninth Circuit declined to rehear the case on April 13. Justice Kagan granted an extension on June 4 that moved the filing deadline to September 10, and the petition was filed that day.

Chad E. DeVeaux of Bartko Pavia LLP is counsel of record. Erwin Chemerinsky, the dean of the University of California, Berkeley School of Law, is also on the cover.

The petition’s own framing of the stakes, quoted by Marijuana Moment, is that “federal illegality does not authorize discrimination,” and that states issuing licenses under the Ninth Circuit’s rule will “bake in advantages for their residents” that persist in the market afterward.

Why a state-law fight reaches the territory

The Dormant Commerce Clause is the rule, drawn from Congress’s power over interstate commerce, that a jurisdiction generally may not discriminate against out-of-jurisdiction businesses. The Virgin Islands is not a state. That distinction does less work here than it looks like it should.

The territory sits in the Third Circuit, which addressed the point directly in Reefco Services Inc. v. Government of the Virgin Islands, decided October 7, 2020:

Under the Territorial Clause, the Virgin Islands is subject to Dormant Commerce Clause principles.

Reefco was not a cannabis case, and the Third Circuit has never ruled on a cannabis residency requirement. What is settled is that the doctrine applies here at all. What is unsettled is what it does to a territorial licensing preference, and no case putting that question has been filed in the territory.

The petition itself does not mention the territories. A full-text search of the document for “territory,” “Virgin Islands,” and “Puerto Rico” returns nothing, so if the Court takes the case, it will do so without the territorial posture in front of it. That leaves out both the Virgin Islands and Puerto Rico, the other US territory in the Caribbean with a medical cannabis program.

The rule in question

Under the Virgin Islands Cannabis Use Act, an entity holding a cannabis license must be at least 51 percent owned by Virgin Islands residents on a fully diluted basis. A resident, for that purpose, is a natural person who currently lives in the territory and has lived here for 10 of the last 15 years. Minority investors below 50 percent are not subject to it, and employees are not subject to it at all. The dispensary licensing guide sets out the full ownership structure, and the same threshold runs through cultivation and micro-cultivation.

A 10-of-15-years lookback is longer than the Maine officer-and-director rule the First Circuit struck down in 2022 and longer than the New York preferences the Second Circuit reached in 2025. It is also not new, and it is not the territory’s first residency tangle. The 2019 medical statute carried a two-year residency definition alongside a five-year rulemaking mandate, a conflict resolved by appeal to legislative intent rather than to text. The residency rule explainer covers that episode.

What this changes, and what it does not

It changes the odds, not the law. On September 3 the Congressional Research Service published a Legal Sidebar concluding that the three-way split among the First, Second, and Ninth Circuits raises the likelihood of Supreme Court review “at some point,” per The Marijuana Herald’s account. A filed petition from the case that created the split is a more concrete step than that estimate.

It is still a petition. The Court declined the same question on February 23, 2026, when it turned down review in Jensen v. Maryland Cannabis Administration, and the split was already visible then. Most petitions are denied.

One section of this petition argues that rescheduling cannabis does not alter the question presented. That is the petitioners asking the Court not to wait for the Schedule III proceeding to settle the issue. The Ninth Circuit’s reasoning rests on the market being federally illegal, so a change in federal scheduling bears directly on it.

Where the territory stands meanwhile

The second-round window closed on September 15. It covered cultivation, manufacturing, micro-cultivation, and research and development on St. Thomas, St. Croix, and St. John, with dispensary applications on St. Croix alone, per the terms OCR set in July. The 51 percent threshold applied to every category in it. The Office of Cannabis Regulation had not published an application count as of September 18.

What to watch

• December 4. The extended deadline for responses to the petition. A waiver of response rather than an opposition would be the first signal of how seriously the states take the risk of review.
• Distribution for conference. Nothing happens on this petition before the briefing closes, and the Court’s first realistic look comes after that.
• Whether anyone files here. No challenge to the territory’s ownership rule appeared on any docket found as of September 18. An applicant rejected on residency grounds out of the round that closed September 15 would be the first plausible plaintiff.