New York: Court reduces number of licenses awarded to dispensaries

More than 30 dispensary license holders, who were given the green light in August to move forward with their retail businesses, saw the situation reverse last week following an injunction issued by the Supreme Court of Albany County. This legal outage has left 410 successful retailer applicants at a loss for what to do, with their hopes of progress stalled. 

legal conflicts

The road to allowing access to cannabis for adult use in New York has been anything but fast. This slowdown of an already sluggish program is the result of a lawsuit filed on August 2 by four disabled veterans. Their argument is that the New York Office of Cannabis Management (OCM) violated the Cannabis Taxation and Regulation Act (MRTA) by excluding them and other groups from licensing opportunities.

Just five days after the filing of the lawsuit, on August 7, New York State Supreme Court Justice Kevin Bryant issued a preliminary injunction. This injunction prevented OCM regulators from granting additional licenses or approving the opening of dispensaries to those struggling to establish their businesses.

Implications for Adult Conditional Use Dispensary (CAURD) license holders

The preliminary injunction has had a significant impact on the 463 conditional adult-use retail dispensary licenses (CAURD) awarded to social equity applicants since the end of 2022. Of these licenses, 23 have already started operations, including 18 dispensaries and five operators of distribution. These 23 companies are committed to combating the illicit market and satisfying the demand for legal cannabis in a state with a population of around 19,5 million inhabitants.

Injunction Exceptions: A Glimmer of Hope

Following an initial hearing, Judge Bryant introduced, on 18 August, an exception to the temporary restraining order for CAURD awardees: companies that could demonstrate significant economic losses for their investments and that had fulfilled all the prerequisites of licensing. This included approval of the local plan by the MCO Cannabis Control Board and, if applicable, local municipalities prior to the August 7th injunction.

Judge Bryant highlighted that the court had established a process by which individual license holders could prove that they should be exempt from the injunction based on their unique circumstances.

Reduction in affected license holders

On 22 August, the court released a list of 30 CAURD license holders who met the exemption criteria. As a result, the number of licensees affected by the preliminary order was reduced from 440 to 410. While relief was granted to 30 prospective cannabis companies, the fate of the remaining 410 companies remains uncertain as litigation continues.

The plaintiffs' argument is based on the Cannabis Regulation and Taxation Act (MRTA), which stipulates that the CMO's Cannabis Control Board must open the initial adult-use cannabis retail dispensary license application period. simultaneously for all applicants.

Judge Bryant recognized the persuasive authority supporting the plaintiffs' claim that the OCM failed to respect the plain language of the relevant legislation.

Precedents and Impacts on the New York Cannabis Market

This isn't the first lawsuit to disrupt the launch of adult-use cannabis in New York. Another lawsuit filed in September 2022 by Variscite NY One Inc. resulted in an injunction affecting retail cannabis licenses in specific regions.

Judge Bryant criticized the OCM for advancing the CAURD program despite ongoing litigation and awareness of constitutional concerns. He pointed out that the defendants' actions may have contributed to the harm they now present in their case.