The state reached an agreement with a marijuana company Monday that eliminates the rule that would have required applicants to have lived in Maine for 4 years.

You no longer have to be a Maine resident to open a recreational marijuana business in Maine.

The state and Wellness Connection of Maine reached a legal agreement Monday stipulating that the Office of Marijuana Policy will no longer enforce a residency requirement on those seeking an adult-use cannabis business license.

The decision essentially invites out-of-state investors into Maine’s projected $180 million a year adult-use market.

“Access to capital is crucial in this industry if you want to be successful, not just for Wellness, but for the broader industry, too,” Wellness attorney Matt Warner said. “The residency requirement was the single biggest impediment to getting the industry off the ground quickly and efficiently.”

The courts have struck down residency requirements on constitutional grounds before, but never in the cannabis industry, which is still outlawed by federal law. The lawsuit Wellness filed in March marked the first time a marijuana company had challenged the constitutionality of the licensing preference.

Other legalized states such as Colorado and Oregon have abandoned resident-only licensing mandates in cannabis for policy reasons, not legal ones, after realizing the policy had cut their businesses off from the out-of-state investments needed to succeed.

In its lawsuit, Wellness argued that a residency requirement violates its constitutional right to interstate commerce by explicitly favoring Mainers over non-residents. Wellness, Maine’s largest medical cannabis company, is controlled by an out-of-state investor owned by multinational Acreage Holdings.

Current Maine law requires every officer, director and manager of an adult-use cannabis business, and a majority of its ownership, to live and file taxes in Maine for at least four years. That mandate would have lapsed in June 2021, but it would have given locals a leg up at the outset of the new market.

Wellness is 51 percent-owned by Mainers, according to the Wellness lawsuit. If it sought to raise money from out-of-state investors, that could tip the ownership balance and would’ve made Wellness ineligible under current Maine law to receive a state adult-use permit.

Office of Marijuana Policy Director Erik Gundersen said his agency took the action on the advice of the Attorney General’s Office, which concluded Maine was unlikely to beat the Wellness suit in court. The office will now introduce legislation to remove the preference and change its underlying rules.

Gundersen said the decision will have no impact on its roll-out of adult-use sales, which were set to begin next month but have been on hold due to public health concerns raised by the possibility of large opening day crowds amidst the COVID-19 pandemic and the need to get local approval for marijuana testing labs.

Local licensing preference has been at the heart of the Maine Marijuana Legalization Act since voters first approved commercial sales in 2016. It began as a carve-out for existing medical marijuana providers, who must be Mainers, but turned into a four-year residency requirement during legislative overhauls.

But even medical marijuana may not be a safe harbor for Maine-based cannabis entrepreneurs. With the recreational challenge behind it, Wellness is now discussing whether to try to overturn Maine’s state residency requirement for medical marijuana providers, too, Warner said.

Wellness is also likely to ask the Portland City Council, which is finalizing its marijuana licensing regulations now, to strike the residency preference from the municipal calculations it has devised to determine who is going to get one of the limited number of local marijuana licenses, Warner said.

“This leaves Maine voters with almost nothing we voted for in 2016,” said Mark Barnett, founder of the Maine Craft Cannabis Association. “Mainers did not want corporate marijuana, but that is exactly what we’ll be getting now. It’s going to be a race to the bottom.”

Barnett predicted out-of-state marijuana companies would now be free to flood the Maine market with cheap, low-quality cannabis to drive Maine-owned companies that don’t have the money in the bank to match corporate-subsidized prices out of business, and then raise prices on Maine consumers.

“That’s the blueprint,” Barnett said. “It’s going to be up to Maine consumers to do a little education to learn where their marijuana is coming from. Do they want to support the out-of-state bully that sued the state when it didn’t get what it wanted, or do they want to support small Maine businesses?”