New York Judge Pauses Cannabis Dispensary Licensing

A New York judge on Monday issued a temporary injunction barring state cannabis regulators from issuing licenses for retail marijuana dispensaries in response to a lawsuit challenging the rules for obtaining the lucrative permits. A group of military veterans filed the lawsuit last week, arguing that the state’s rules limiting the first Conditional Use Retail Dispensary (CAURD) licenses to those with previous marijuana convictions violates state law and New York’s Constitution.

The lawsuit was filed by four veterans who have served a combined total of more than two decades in various branches of the U.S. military. The vets argue that restricting retail licenses to those with cannabis convictions violates the state Constitution and was not approved by the legislature when it legalized adult-use cannabis two years ago.

The Marijuana Regulation and Taxation Act, the 2021 law that legalized recreational marijuana in New York, includes provisions that set a goal of awarding at least half of the state’s recreational marijuana dispensaries to social and economic equity applicants. Under a program launched by New York Governor Kathy Hochul last year, the state’s first CAURD licenses for retail cannabis shops have been reserved for “individuals most impacted by the unjust enforcement of the prohibition of cannabis or nonprofit organizations whose services include support for the formerly incarcerated.” 

To be eligible for a CAURD license, applicants are required to either have had a cannabis conviction or be the family member of someone with a cannabis conviction, among other criteria. Nonprofits with a history of serving formerly or currently incarcerated individuals were also eligible to apply for a CAURD license. So far, the Office of Cannabis Management (OCM), the state’s cannabis regulatory agency, has issued 463 CAURD licenses, although less than two dozen dispensaries have opened statewide.

Matt Morey, an attorney and legal analyst, says that the MRTA established service-disabled veterans as a sub-class of social and economic equity applicants who could be given priority in cannabis licensing. But so far, the OCM has only approved applications from justice-involved individuals.

“The statute specifically included those individuals as individuals that would be prioritized with respect to applying for and gaining approval of an adult use retail license,” Morey told Spectrum News.

The veterans who filed the lawsuit last week argue that the state’s implementation of the CAURD program unfairly and improperly excludes other potential social and economic equity applicants, including disabled veterans and members of minority groups.

“Individuals like service-disabled veterans, who are also social equity applicants, who should be prioritized under the MRTA – the Marijuana Regulation and Taxation Act – the plaintiffs are arguing that they’ve been harmed by being left out of this first mover’s advantage,” said Fatima Afia, an attorney with Rudick Law Group.

William Norgard, a U.S. Army veteran and one of the plaintiffs in the case, said that New York’s implementation of MRTA puts him and other veterans in the unusual position of challenging the government.

“It’s out of character for a veteran to sue the state to uphold a law,” Norgard said in a statement when the lawsuit was filed. “We take oaths to defend the laws of our nation, and trust — maybe naively — that government officials will faithfully and legally execute those laws. What the Office of Cannabis Management is doing right now is in complete breach of that trust. As veterans, we know that someone has to hold the line.”

Order Bars OCM From Issuing New Licenses

The judge’s temporary restraining order bars the OCM from issuing or processing additional licenses for marijuana retailers until the court rules otherwise. When asked for comment after the lawsuit was filed, an OCM spokesperson said the agency does not comment on pending litigation. Later, the agency said it had received the injunction and would comply with the judge’s ruling.

“The Office of Cannabis Management (OCM) is aware of the Court’s Order and is adhering to its requirements,” the agency wrote in a statement on Tuesday. “We are actively communicating with CAURD applicants and provisionally approved licensees to inform them of the impact of the Court’s order on OCM operations.”

State Senator Jeremy Cooney, the chair of the New York State Senate Subcommittee on Cannabis, released a statement on Monday evening in response to the judge’s temporary injunction.

“I am deeply disappointed in today’s court decision, which temporarily stops the awarding of conditional cannabis retail licenses in New York State,” said Cooney. “It is no secret that New York’s adult-use cannabis roll-out has been slower than expected, and now is not the time to stand in the way of progress made. We must focus on awarding non-conditional licenses, which will prioritize social equity candidates and allow more businesses to open.”

The judge’s restraining order will cause further delay in the rollout of New York’s regulated marijuana industry, which is already facing steep challenges and an entrenched illicit cannabis market.

“This is going to drag things out even further,” Morey said. “This has not been a smooth rollout by any means with respect to these programs.”

Morey said that the dispensary licenses already issued face no immediate jeopardy from the judge’s ruling. But if the regulations governing licensing are ruled invalid, the fate of current licensees could be uncertain.

“If the creation of the entire CAURD program is deemed to be unconstitutional, then that would then raise the question as to whether or not previously issued licenses are in fact invalid at this point under the program, and that remains to be seen,” he said.