{"id":58796,"date":"2022-12-01T06:00:00","date_gmt":"2022-12-01T14:00:00","guid":{"rendered":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/2022\/12\/01\/litigation-blocks-new-york-cannabis-retail-licenses\/"},"modified":"2022-12-01T17:45:20","modified_gmt":"2022-12-02T01:45:20","slug":"litigation-blocks-new-york-cannabis-retail-licenses","status":"publish","type":"post","link":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/2022\/12\/01\/litigation-blocks-new-york-cannabis-retail-licenses\/","title":{"rendered":"Litigation Blocks New York Cannabis Retail Licenses"},"content":{"rendered":"<\/p>\n

More than a year-and-a-half after New York cannabis became legal in the state, the first retail licenses<\/a> have finally been issued, but several more have been blocked by court order. The legal case appears to be a ploy by out-of-state money to break into the Empire State\u2019s lucrative market\u2014even if it means undermining the state\u2019s ambitious \u201cequity\u201d program.<\/p>\n

Michigan Meddling<\/h4>\n

The\u00a0Cannabis Control Board<\/a>\u00a0of the New York\u00a0Office of Cannabis Management (OCM<\/a>) on Nov. 21 awarded<\/a> 36 Conditional Adult-Use Retail Dispensary (CAURD<\/a>) licenses. It was a first step toward what is projected to be a $5 billion market\u2014potentially the largest in the country.\u00a0And not one of the licenses went to multi-state operators (MSOs) with 28 awarded to people with past cannabis convictions, or family members with such convictions. Another eight went to non-profit organizations involved in questions of social justice\u2014such as\u00a0Housing Works<\/a>, which helps provide housing for HIV-positive individuals. The first 150 license-holders are to be chosen for such criteria, and will be\u00a0eligible<\/a>\u00a0to receive aid from a $200 million\u00a0Social Equity Cannabis Investment Fund<\/a>.\u00a0\u00a0<\/p>\n

In a statement to the press<\/a>, Control Board chair Tremaine Wright said: \u201cWith the first adult-use retail dispensary licenses in the hands of businesses and eligible nonprofits, we\u2019ve ensured the first sales will be made at dispensaries operated by those impacted by the unjust enforcement of cannabis prohibition.\u201d\u00a0 \u00a0<\/p>\n

However, the state is\u00a0temporarily blocked<\/a>\u00a0from issuing 63 licenses because of an injunction in a federal\u00a0lawsuit<\/a>\u00a0filed by what appears to be a Michigan-based company. The plaintiff, Variscite NY One, is challenging the eligibility requirements under the equity program on the basis that they violate the so-called \u201cDormant Commerce Clause\u201d of the US Constitution. An interpretation of the Commerce Clause<\/a> rather than an actual constitutional text, this refers to the prohibition against states passing laws that discriminate against or excessively burden interstate commerce. Variscite maintains that the equity program criterion of a cannabis conviction in New York falls into this category.\u00a0\u00a0<\/p>\n

Bad Break for Brooklyn\u00a0<\/h4>\n

In the Nov. 10 decision, Judge Gary L. Sharpe of the US District Court in Syracuse barred the state from issuing retail licenses in five regions of the state\u2014Brooklyn, Central New York, the Finger Lakes, the Mid-Hudson area and Western New York. So under those 28 licenses issued 11 days later, four New York City boroughs are to get dispensaries\u2014Manhattan, Queens, the Bronx and Staten Island. But\u00a0not Brooklyn<\/a>, the most populous borough, with 2.6 million people.\u00a0<\/p>\n

These five regions were chosen by Variscite as areas it seeks to operate in but supposedly faces discrimination. The company is 51% owned by Kenneth Gay, who indeed has a past cannabis conviction\u2014but in Michigan, not New York. And while Variscite is registered in Albany<\/a>, the owners don\u2019t seem to live in the state of New York. The CAURD program requires applicants to have a \u201csignificant presence\u201d in the Empire State.\u00a0Judge Sharpe\u2019s ruling only applies to licenses issued under the CAURD program, so Brooklyn and the other regions covered by the injunction still stand to get eventual dispensaries, even if Variscite prevails in the courts.<\/p>\n

Queried about Variscite\u2019s chances, the OCM only issued the following terse statement to Albany\u2019s\u00a0News10<\/a>: \u201cWe don\u2019t comment on pending litigation. The Office of Cannabis Management is committed to the Marijuana Regulation and Taxation Act\u2019s goals of including those impacted by the state\u2019s enforcement of cannabis prohibition in the market that we\u2019re building and we\u2019re additionally committed to getting the New York cannabis supply chain fully operational. The Cannabis Control Board will soon have before it applications for the Conditional Adult Use Retail Dispensary license which will start closing that supply chain.\u201d<\/p>\n

300,000 Pounds in Warehouses<\/h4>\n

This isn\u2019t the first such legal battle for Michigander Gay\u2014which has raised questions about his motives by\u00a0voices in the cannabis industry<\/a>. In 2020, he filed a similar suit via a company called Peridot Tree against the city of Sacramento, CA\u2014again claiming its licensing program ran afoul of interstate commerce protections. He didn\u2019t prevail in the district court and is currently\u00a0taking the case<\/a>\u00a0to the Ninth Circuit Court of Appeals.<\/p>\n

\u00a0Meanwhile, this hold-up is slowing down an already tortuous process in New York that has implications for cultivators as well as retailers. As\u00a0Bloomberg<\/a>\u00a0reports, the state began issuing cultivation licenses to more than 200 farms this spring, and New York\u2019s first legal harvest is now in\u2014constituting some 300,000 pounds of cannabis flower. But with no legal dispensaries yet operating, it\u2019s all being warehoused\u2014and is in danger of deteriorating.<\/p>\n

\u00a0Supporting In-State Operators<\/strong><\/h4>\n

The state\u2019s commitment to social equity and favoring small operators over MSOs is proving to pose some challenges. As The New York Times<\/a><\/em> reports, companies already operating under the state\u2019s medical cannabis program (including big-name MSOs such as\u00a0MedMen<\/a>) would need to pay $5 million to get in on the adult-use market as wholesalers, and at least $3 million as retailers\u2014with a wait of some three years.\u00a0 The\u00a0New York Medical Cannabis Industry Association<\/a> has raised \u201ca number of serious concerns\u201d over these regulations and vowed to push for changes.\u00a0<\/p>\n

Neil Juneja, a Seattle-based\u00a0attorney specializing in cannabis<\/a>, told Cannabis Now<\/em> that he does view New York\u2019s limitation on out-of-state residents as burdensome: \u201cThis was first provided in Washington state and greatly reduced the ability to raise capital. Early state legalization, such as in Washington, had reasons to limit out-of-state access to the industry, such as questions of federal law. But it\u2019s no longer desirable to consider this kind of prohibition. Without adequate access to capital, the New York cannabis market is hobbled in its growth to a robust industry.\u201d<\/p>\n

As for more general limitations on vertical integration, Juneja has mixed views. \u201cThis provides both benefits and drawbacks. It creates a very competitive market for products, providing the consumer with a great deal of choice and better products. On the downside, it adds in additional costs, which hits the consumer in the wallet, and increases the cost gap between the black market and the (soon-to-be) regulated market.\u201d\u00a0<\/p>\n

Double Standards and the Commerce Clause\u00a0<\/h4>\n

In a final ironic postscript to all this,\u00a0Advance Media<\/a>\u00a0reports that MedMen brought suit in a New York federal court in October, arguing that its Gotham-based landlord Thor Equities<\/a> couldn\u2019t demand back rent on a Chicago retail space because cannabis is illegal under federal law. The case was unceremoniously laughed out of court<\/a> on Nov. 21.\u00a0<\/p>\n

It seems that for MSOs, cannabis is a legitimate interstate commodity only when they want it to be.<\/p>\n

The post Litigation Blocks New York Cannabis Retail Licenses<\/a> appeared first on Cannabis Now<\/a>.<\/p>\n


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More than a year-and-a-half after New York cannabis became legal in the state, the first retail licenses have finally been issued, but several more have been blocked by court order. The legal case appears to be a ploy by out-of-state money to break into the Empire State\u2019s lucrative market\u2014even ifContinue Reading<\/a><\/span><\/p>\n","protected":false},"author":190,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[50,4208,90,1005,208,3584,1792],"tags":[],"_links":{"self":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/58796"}],"collection":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/users\/190"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/comments?post=58796"}],"version-history":[{"count":1,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/58796\/revisions"}],"predecessor-version":[{"id":58797,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/58796\/revisions\/58797"}],"wp:attachment":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/media?parent=58796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/categories?post=58796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/tags?post=58796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}