The Montana Supreme Court passed a ruling on Thursday that will result in one of the most significant rollbacks of a U.S. medical marijuana industry to date.

The court voted to uphold a provision stating that medical cannabis caregivers can provide medicine to a maximum of three patients — a severe commercial limitation for the state’s 12-year-old medical marijuana program.

Justice Beth Baker wrote in the court’s majority opinion, “The Legislature determined that placing a limit on the number of registered cardholders a provider may assist serves the objectives of keeping marijuana away from large-scale manufacturing operations, making it less appealing to major traffickers.”

Other provisions upheld by the court include a ban medical cannabis advertising and a mandated review process for any doctor who issues more than 25 medical cannabis recommendations.

Montana voters legalized medical cannabis in 2004. Following a period of explosive growth in the industry, however, federal authorities raided several large-scale providers and cultivation facilities in 2011, which in turn prompted the state...