A Los Angeles-based craft distillery is challenging a New York law that prevents it from shipping its products directly to customers in New York.
Théron Regnier, founder of The Obscure Distillery, launched and grew the company during the height of the COVID-19 pandemic. The distillery attracts over 30,000 visitors annually to its location in Los Angeles, many of whom are eager to ship spirits to their home state.
However, due to a recently introduced state law, New Yorkers are unable to have The Obscure Distillery’s spirits shipped to their homes. In August of 2024, Governor Kathy Hochul signed Senate Bill S2852A, allowing New York’s small craft manufacturers of spirits, cider and mead to ship directly to consumers.
The catch? The law also outlines restrictions on certain out-of-state retailers, preventing them from shipping directly to New York residents.
“Laws that treat businesses differently based on location are discriminatory and unconstitutional,” says Jeff Jennings, attorney for Pacific Legal Foundation. “By allowing in-state distilleries privileges that out-of-state distilleries don’t have, New York has created an unfair trade barrier, violating the Constitution’s Commerce Clause.”
New York Senate Bill S2852A
The newly signed law aims to open opportunities for the state’s growing craft beverage industry by providing a vital market expansion tool—allowing these producers to ship their products directly to consumers within New York and across state lines. But in the process, the law also prevents out-of-state distilleries from competing fairly within the Empire State.
“I think reciprocity provisions are basically designed to put pressure on other states to open their markets up to New York, but that type of trade war type tactic is unconstitutional,” Jennings says. “The United States is a free trade zone for the states, and you can’t discriminate just because another state is discriminating against you.”
The Obscure Distillery has a special connection to New York, producing a rare whiskey made with American chestnut tree trimmings sourced from the Empire State.
The distillery also donates 10% of the sales from this whiskey to the American Chestnut Foundation to support the revitalization of the American chestnut tree in New York and other states. So, this shipping ban feels like a personal blow to them.
The Obscure Distillery Fights Back
Represented at no charge by Pacific Legal Foundation, The Obscure Distillery is taking a stand against the ban in the case The Obscure Distillery v. Lily M. Fan. It has filed a federal lawsuit challenging New York’s law that hinders out-of-state distilleries from competing on an equal footing with in-state counterparts.
The outcome could have significant implications for the craft distilling industry, potentially paving the way for fairer regulations that support entrepreneurship and consumer choice across state lines.
“We feel very strong about our position,” notes Jennings. “The Supreme Court has already ruled in the decision involving wineries in which you can’t discriminate against out-of-state alcohol producers. And that logic applies to the spirits industry, as well.”
What Happens Next?
Jennings explains that if The Obscure Distillery wins, New York will be forced to stop enforcing the reciprocity provisions, opening the state back up to the entire country once again.
“It would be a huge boom for direct-to-consumer shipping on the spirits industry since so few states allow it,” Jennings says. “New York is such a big market, so if we open it up, we’re hoping it will encourage other states to do the same. It’ll create a domino effect for the spirits industry.”
