Cannabis Update

Judge Halts New Cannabis Dispensary Openings

In early August, a group of disabled veterans filed a lawsuit against New York’s cannabis regulators, saying that the state’s current licensing program is unconstitutional. The state’s Conditional Adult-Use Retail Dispensary (CAURD) licensing program prioritizes applicants who have been harmed by prior cannabis convictions from when the substance was illegal. This new lawsuit is one of several targeting the state’s Office of Cannabis Management and Cannabis Control Board.

“It feels like we were used to get a law passed – a good law, one that helps a lot of people, as well as the state,” said Carmine Fiore, a plaintiff in the case. “Then, once it was passed, we were cast aside for another agenda.” The law legalizing cannabis in New York required the Office of Cannabis Management and Cannabis Control Board to open the first dispensary applications “at the same time.” The law also prioritizes “social and economic equity applicants,” including individuals from communities disproportionately impacted by cannabis enforcement, minority-owned businesses, women-owned businesses, distressed farmers, and service-disabled veterans. The lawsuit alleges that the state’s cannabis regulators crafted a “new ‘social equity’ policy that is inconsistent with the priorities of the Legislature” when they created a program prioritizing a narrower pool of applicants than stated in the law.

On Monday, August 7th, New York Supreme Court Justice Kevin Bryant issued a ruling temporarily blocking new dispensary licenses from being issued. Justice Bryant’s ruling states that without a court order blocking the licensing program, it appears “that there is genuine urgency and that immediate and irreparable injury, loss, or damage will result” if the program continues. However, the ruling goes beyond simply halting the issuance of new cannabis dispensary licenses – it also blocks those who have already been issued a dispensary license from being granted operational approval, preventing them from moving forward with opening.

Cannabis entrepreneurs have said rulings like this are not dissimilar from actions taken in other states that have cannabis markets with social equity programs. “Special interest groups have found ways to pit one social equity group against the other,” said entrepreneur Osbert Orduna, who is part of a team that was granted a license reserved for justice-impacted applicants. Orduna, who is also a service-disabled veteran, added that other service-disabled veterans who have already been issued licenses are “going to suffer” because of the ruling. His business, which is currently doing deliveries, is also in the process of beginning construction on a dispensary in Queens, but will not be able to open once completed due to the court order.

After a hearing where the Office of Cannabis Management provided Justice Bryant with a list of 30 applicants who were in the final stages of the application process, it was ruled that those 30 applicants could move forward with opening. However, on Tuesday, August 29th, Bryant reversed this order and ruled that his August 7th injunction will remain in place for all pending applicants.

In his order, Bryant said that state cannabis regulators had implied all 30 applicants were in the final stages of the application process and had met all requirements needed to open their shops. However, an affidavit filed by First Deputy Director of the Office of Cannabis Management Patrick McKeage said that not all of the 30 applicants had completed the necessary steps. “They have submitted a list which, by their own admission, includes licensees who are still finalizing construction and whose post-selection inspections have not been scheduled or completed,” Justice Bryant wrote in his ruling. “It is also clear that an unclear number of the sites have not been inspected ‘to ensure (the site) meets all the public health and safety requirements in the Cannabis Law and associated regulations.’ It is not clear to this court whether any of the 30 identified licensees have completed all post-selection requirements and inspections and it should be clear that those who have not, should not have been included on the list submitted to the court as set forth in the prior order.”

Over 400 licensees will need to wait to move forward while the legal challenge continues. Another hearing is scheduled for September 15th.

Cannabis Control Board Approves Final Adult-Use Cannabis Regulations

On Tuesday, September 13th, the Cannabis Control Board approved the final adult-use cannabis regulations which lay the groundwork for the expansion of New York’s cannabis industry. The nearly 350-page document outlines the licensing process and operation procedures for the different types of cannabis businesses. The full regulations can be found here:

“Today marks the most significant expansion of New York’s legal cannabis market since legalization, and we’ve taken a massive step towards reaching our goal of having New Yorkers being able to access safer, regulated cannabis across the state,” said Chris Alexander, Executive Director of the Office of Cannabis Management (OCM). “The regulations finalized today are the result of robust engagement with stakeholders across the State who submitted thousands of comments. This final package truly represents the values of equity and competition that we believe are central to this market.”

Also, the Cannabis Control Board announced that they will be opening the application process for all aspiring cannabis entrepreneurs as early as October 4th, with 50 percent of licenses set aside for social and economic equity applicants. Currently, under the CAURD program, only individuals who have previous marijuana convictions have been allowed to apply. As mentioned above, that program has been halted by State Supreme Court Justice Kevin Bryant in response to a lawsuit filed by a group of service-disabled veterans.

OCM Chief of Staff & Police Director Axel Bernabe Announces Regulations

Also, during the Cannabis Control Board meeting on September 13th, Axel Bernabe, who has served as OCM’s Chief of Staff and Policy Director announced he will be leaving the agency. “This has undoubtedly been the most humbling experience of my professional career,” Bernabe said. “It’s been the most challenging., bar none…It’s also been a privilege to be able to contribute substantially to the vision for an equitable, small-business-driven market in New York.”

OCM Executive Director Chris Alexander praised Bernabe’s work with the agency, calling him a “brother.” Alexander also noted that it was a natural time for Bernabe to step down, given the release of the general licensing regulations, saying, “Now that we’ve put forward the regulations to go final, his work is done and it’s time to hand off the baton to somebody else to continue.”

Bernabe did not say where he would be going next.