Marijuana industry stakeholders are worried New York’s legal cannabis market – which was supposed to launch in the next seven weeks – could get held up in litigation, after a federal judge placed an injunction on the state’s conditional dispensary program.
People preparing to sell recreational marijuana in New York and those who've grown and harvested the state's first crop are concerned a federal ruling blocking retail licenses will delay the industry's kickoff upstate and impact their businesses.
U.S. District Court Judge Gary Sharpe issued an injunction Thursday blocking state cannabis regulators from issuing retail licenses in Central New York, Western New York, the Finger Lakes, the Mid-Hudson region and Brooklyn amid a lawsuit by company Variscite after its application to be one of the state's first retailers was denied. Sharpe, blocked New York’s Office of Cannabis Management from issuing any cannabis licenses under the Conditional Adult-Use Retail Dispensary application program in five of the 14 regions in which the agency is licensing CAURD dispensaries. The injunction applies to CAURD applicants in the Finger Lakes, Central New York, Western New York, Mid-Hudson and Brooklyn.
The program was designed to allocate New York’s first marijuana retail licenses to people who have been convicted of a cannabis-related crime – or have a family member who was – and have also run a profitable business for at least two years. As part of the program, the Dormitory Authority of the State of New York (DASNY) will secure up to 150 properties across the state, which the agency – through contractors – will renovate into dispensaries where CAURD licensees will locate their businesses.
Sharpe’s decision came as part of a lawsuit filed against the state by Variscite NY One, a Michigan company. Variscite sued after the state found it was ineligible for CAURD because the company is 51% owned by an individual who has no significant connection to New York and who has a cannabis conviction in Michigan. CAURD rules require an applicant must have been convicted of a cannabis crime in New York and have a “significant presence” in New York.
Variscite’s suit argues that the CAURD requirements discriminate against out-of-state cannabis operators in violation of the federal legal theory called the Dormant Commerce Clause. The clause prohibits states from passing legislation that discriminates against or excessively burdens interstate commerce, according to Cornell University.
Cannabis growers and more than 900 people who applied for the state's first Conditional Adult-Use Retail Dispensary licenses are concerned the decision will slow the opening of marijuana stores upstate. Officials with the state Office of Cannabis Management say they're forging ahead with processing hundreds of retail license applications as quickly as possible and expect the anticipated timeline for New York's first recreational marijuana sales by the end of the year to stay on track.
New York's Conditional Adult-Use Retail Dispensary program and related $220 million fund were legislated to support the state's first 150 retail dispensaries. This first tranche of licenses is reserved for people with a significant presence in the state and a previous marijuana conviction under former drug laws.
OCM declined to comment on the lawsuit, but said in a statement that the Cannabis Control Board still plans to consider CAURD applications. “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,” OCM’s statement said.
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