Montana cannabis regulators are shoring up their program’s residency requirements after a U.S. circuit court ruled that federal prohibition allows states to discriminate against nonresidents in their licensing schemes.
Beginning Sept. 26, Montana’s cannabis licensees will be required to provide the state’s Department of Revenue with names and proof of residency for individuals who have “day-to-day operational control” over their businesses – whether they own the business or not.
The DOR adopted the final rule for this requirement on Sept. 21, after publishing the proposal in the Montana Administrative Register and holding a public hearing in August to consider the proposal.
Pepper Petersen, of the Coldwater Group, was the lone public commenter. He objected to the proposed rule, in part, because he claimed Montana’s residency requirement violates the U.S. Constitution’s dormant Commerce Clause and burdens small operators.
The DOR responded by clarifying that the Montana Marijuana Regulation and Taxation Act (MMRTA) – enacted in 2021 after voters supported an adult-use legalization measure with a 57% majority in the November 2020 election – has always contained a residency requirement, and that the new rule was necessary due to the lack of a statutory definition for “day-to-day operational control.”
“The department further directs Mr. Petersen to Peridot Tree WA, Inc. V. Wash. State Liquor & Cannabis Control Bd., 162 F.4th 1179 (9th Cir. 2026), a decision from the Ninth Circuit holding that the dormant commerce clause does not apply to state cannabis dispensary licensing regimes with residency requirements,” DOR officials said in response.
The department was referring to the U.S. Court of Appeals for the Ninth Circuit, which affirmed
district court rulings that licensing schemes in Washington State and Sacramento, Calif., that discriminate against nonresidents could not be challenged as violations of the U.S. dormant Commerce Clause while cannabis remains scheduled under the Controlled Substances Act.
The Ninth Circuit covers nine states, including Montana; however, other circuit courts have ruled differently, setting the stage for the U.S. Supreme Court to potentially interpret the dormant Commerce Clause’s applicability to state-licensed cannabis programs.
In the meantime, Montana’s new rule amends its administrative rules to statutorily define “day-to-day operational control” as “the authority or ability of one or more natural persons to direct or materially influence the routine management, operations or policies of a marijuana business.”
The term includes, but is not limited to, any natural person who:
- has primary responsibility for supervising employees or managing the licensed premises on a daily basis;
- has authority to make or direct routine operational decisions regarding production, manufacturing, testing, distribution or retail sale of cannabis or cannabis products;
- has authority to sign contracts, approve expenditures or control business bank accounts in the regular course of operations; or
- holds a position such as general manager, operations manager, store manager, head cultivator or equivalent role with similar actual authority over daily business activities.
This could potentially impact companies with out-of-state executives or remote corporate management making business decisions.
However, the DOR clarified that employees who temporarily switch job assignments aren’t automatically subject to the new requirements.
“Approved workers who help an owner of a marijuana business with occasional oversight or a business who has employees that switch work assignments for a short term, even if they involve cash handling and closing the business at the end of the day, do not rise to the level of day-to-day operational control,” DOR officials said.
Moving forward, Montana cannabis businesses must identify individuals with day-to-day operational control when applying for an initial license, with each license renewal and within 30 days of any changes to those who have day-to-day operational control.
The DOR also determined that any directly related small business impacts from the new requirements don’t arise from the rulemaking process but rather from the Montana Legislature’s public policy goals under MMRTA.
“The department also contends that impacted opponents would be taking issue with improved guidance for operating compliant cannabis businesses, and the department’s efforts to close operational or legal loopholes that are contrary to the MMRTA,” DOR officials said.
