New York State cannabis agencies and related individuals were served with a lawsuit from four New York veterans (Carmine Fiore, William Norgard, Steve Mejia, and Dominic Spaccio, collectively, the “Plaintiffs”) related to the cannabis market and licensing structure on August 2, 2023. The Plaintiffs are alleging that under the Conditional Adult-Use Retail Dispensary (“CAURD”) licenses, state officials have been favoring “Justice Involved” individuals over disabled veterans in the application process. Their lawsuit has thus far led to the issuance of a temporary restraining order.

The current lawsuit invokes New York’s 2021 Marijuana Regulation and Taxation Act (the “MRTA”) as reasoning for their claim. Their allegations state that the New York Control Board (“CCB”) and Office of Cannabis Management (“OCM”) overstepped their role in interpreting and enforcing the MRTA by improperly interpreting the MRTA’s goal of prioritizing “social and economic equity applicants.” The Plaintiffs argue that this emphasis on social and economic equity applicants should have included minority groups, such as disabled veterans and others, rather than just those with prior drug related convictions. The complaint further alleges that the implementation of the CAURD licenses postponed the ability for hundreds of other dispensaries to be licensed in order to improve access to cannabis and fulfill customer demand.

Status of the Current Lawsuit and Prior Actions

In response to the complaint, on August 7, 2023, the NY Supreme Court ordered the CCB and OCM to stop awarding or processing any further CAURD licenses. OCM may not provide any additional feedback or approvals to existing and provisional CAURD licenses that have been distributed until this point. The Supreme Court did not acknowledge the Plaintiffs request to deem the CCB and OCM’s actions in enacting the CAURD program ultra vires and unconstitutional. Ultra vires meaning that the creation of the CAURD program was done beyond the CCB and OCM’s legal authority. The next court hearing will be on August 25, 2023, and the temporary restraining order will be in effect until then.

This is not the first time that a lawsuit has been filed against New York in relation to their CAURD program. The CCB and OCM have been accused of overreaching in their power to interpret legislative language because they had not opened the application period for dispensary licenses to all applicants simultaneously as promised. This initial lawsuit was brought by the Coalition for Access to Regulated & Safe Cannabis under the claim that the CAURD license procedure is in violation of the MRTA by prioritizing previously convicted individuals. The plaintiffs in this case argue that by putting an emphasis on Justice-Involved individuals, coupled with a poor retail infrastructure and significant delays in the implementation of regulations for the cannabis marketplace, New York State has slowed the entrance of cannabis in the retail market and limited access to those in need. There have not been any updates on this matter since it was initially brought forward.

What does this mean for the state of the NY cannabis market now?

At the moment, there are 463 approved social equity retail licenses distributed, and of those, only 21 retailers are licensed and operational. The current order imposed upon the CCB and OCM will likely slow the rolling out period of the Adult-Use Cannabis Licenses, since the licensees will be unable to move towards becoming operational. New York State has been involved in the preparation of proposed regulations to add to their existing New York Administrative Code regarding all recreational licenses in N.Y. Comp. Codes R. & Regs. tit. 9, Subt. B, Ch. II. New York has announced in the past that the goal is to open Adult-Use Cannabis Licenses to the public by the Fall of 2023. The licenses to be made available will be those listed on Part 120 of the proposed revised regulations to the New York Administrative Code and include the following types of licenses: (1) Nursery; (2) Cultivator; (3) Microbusiness; (4) Processor; (5) Cooperative and Collective; (6) Retail Dispensary; (7) Retail Dispensary with limited retail consumption facility; (8) Conditional Cultivator; and (9) Delivery.

The period for providing comments to Parts 118, 119, 120, 121, 124, 125, and 131, applicable to the above referenced licenses, of the proposed revised regulations to the Administrative Code expired on July 31, 2023. Therefore, the next step, so long as no major revisions are required, would be for OCM to adopt these regulations and announce the next licensure application period. If the Court deems it necessary for the social equity component as required by MRTA to be revised per the allegations made in the current lawsuit, it is possible that an additional social and economic equity period may be added, meaning that the application for all other parties may be further prolonged.

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