New York’s much-anticipated adult-use cannabis retail licensing process has recently been stuck in a haze since August 18, 2023, when a New York Supreme Court judge ruled that the state Office of Cannabis Management’s (“OCM”) discretionary licensing procedure violates New York’s Marihuana Regulation and Taxation Act (“MRTA”). As Duane Morris previously reported, the judge’s ruling, resulting in an injunction and stoppage of the OCM’s ability to grant additional license applications, is the latest in a number of delays and legal disputes that has New York’s cannabis authorization program far behind schedule. The case involves a group of military veterans who claim New York’s initial round of issuing conditional licenses only to people with prior marijuana convictions, and not also to a wider group of service-disabled veterans and other social equity applications, violated the MRTA. As a result of the injunction, the OCM has appealed the decision and seeks either a temporary stay of the injunction or an expedited appeals court briefing schedule.
New York’s regulators were previously sued for their implementation of retail licensing procedures. In October 2022, a lawsuit was filed claiming that the conditional licensing program violated the dormant commerce clause, and resulted in a federal judge initially preventing OCM from issuing licenses in the Finger Lakes, Central New York, Western New York, Mid-Hudson, and Brooklyn until the case was resolved. The case was ultimately settled in May 2023, with the OCM agreeing the plaintiff would be awarded a general adult-use retail dispensary license in the first group of such licenses to be awarded.
Since the MRTA’s passage in 2021, New York has issued over 450 conditional adult-use licenses, yet less than 25 business are currently operating. The delays have left cannabis farmers and hundreds of retail store license holders without a means of earning revenue while the program’s targeted roll-out dates have continually been pushed back. Meanwhile, thousands of unlicensed businesses have remained open and operating, most of which are conspicuously located in popular areas of New York City.
The OCM argues on appeal that the New York State legislature implicitly approved the conditional licensing program by authorizing similar licensing procedures for cannabis growers and processors, and that the injunction harms the hundreds of retailers with conditionally-approved licenses who are currently unable to open and sell their products. OCM also argues that the conditional licenses are granted pursuant to a discrete and temporary license program different from the process for permanent licenses, as applications for the latter must be opened for everyone at the same time. The appeal is in the initial stages of scheduling and initial pleadings, with the state imploring the Appeals Court to hear argument and rule on its appeal as soon as possible.
The OCM appeal comes days after OCM announced on September 12, 2023 that it voted for new regulations that would expand New York’s marketplace for legal marijuana by allowing “a broad universe of individuals and small businesses across the state” to apply for new cultivator, processor, distributor, microbusiness, and retail dispensary licenses, beginning on October 4, 2023. Those with currently-operational conditional licenses will also able permitted to apply for full, non-conditional licenses. The statement touted the success of the 23 state-licensed dispensaries that have been permitted to open, citing their cumulative sales of over $70 million through August 2023, with over $34 million reported in July and August 2023 alone.