
A federal judge dismissed a lawsuit Feb. 2 that sought to once again halt New York’s cannabis licensing process, but problems persist for the state’s troubled adult-use rollout.
Albany Judge Anne Nardacci rejected litigation brought in December by two Los Angeles-based companies seeking a restraining order and preliminary injunction to stop regulators from issuing licenses while the lawsuit made its way through court, The Associated Press reported.
The California-based applicants argued that New York’s adult-use cannabis licensing program unconstitutionally discriminates against out-of-state residents, according to AP.
At the center of the plaintiffs’ argument was the dormant Commerce Clause of the U.S. Constitution, which bars states from adopting protectionist policies to restrict interstate commerce when there are no rules in place from Congress. The plaintiffs claimed the dormant Commerce Clause should allow them to participate in New York’s cannabis market, but Nardacci said that the main purpose of the clause does not apply to the federally illegal cannabis industry, according to AP.
Nardacci ruled that the public interest in allowing licensed businesses to serve the New York market outweighs the concerns outlined in the lawsuit, the news outlet reported. In her written ruling, she said that an injunction stalling the licensing process would allow the unlicensed and unregulated stores that currently dominate New York’s cannabis market to continue to thrive in the absence of licensed shops.
New York Attorney General Letitia James applauded Friday’s ruling.
“This is an important victory in our efforts to ensure that disproportionately impacted communities are given their fair share in the legal cannabis industry,” James told AP.
New York’s adult-use cannabis market has been slow to launch after a nonprofit organization made the first sales in December 2022. There are currently 61 licensed adult-use retailers across the state, according to data from the New York Office of Cannabis Management (OCM).
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The OCM announced in early December that six of the state’s 10 medical cannabis operators—called registered organizations (ROs)—have been approved to enter New York’s adult-use market. Regulators also closed an application window Dec. 18 for new adult-use businesses, including cultivators, processors, distributors and retailers.
While James’ dismissal of the lawsuit Friday paves the way for the state to issue these new licenses, more pending litigation could threaten to delay the process yet again.
In a lawsuit filed Jan. 29 by a group of women in Albany Supreme Court, the plaintiffs are challenging the state’s use of a randomized lottery system to build out a queue to determine the order in which regulators will review the applications for the new licenses. The plaintiffs claim that the lottery system is “arbitrary and capricious,” according to The Buffalo News.
Days before that litigation was filed, a central New York business owner brought a lawsuit of his own, alleging that New York’s licensing process is biased against white men, the news outlet reported.
Both lawsuits seek court injunctions that could temporarily bar New York regulators from issuing additional cannabis licenses.
In November, the state approved a settlement agreement to end yet another lawsuit; that litigation, brought by a group of service-disabled veterans, argued that the OCM violated state law when regulators excluded them and other groups from adult-use cannabis licensing opportunities.
State Supreme Court Judge Kevin Bryant issued a temporary injunction in August in response to the lawsuit, blocking regulators from issuing new licenses and approving new dispensary openings for more than three months. Ultimately, more than 400 licensees were left in limbo under the court order until it was lifted late last year.
Meanwhile, the OCM abruptly postponed its Jan. 24 meeting, when regulators were expected to approve new adult-use retail licenses and home grow rules. Regulators said they needed more time to finalize their review of applications being considered for approval.
Gov. Kathy Hochul slammed New York’s adult-use rollout last week in an interview with the editorial board of The Buffalo News.
“It’s a disaster,” Hochul said. “I will not defend that for one second.”
Hochul told the news outlet that the Jan. 24 meeting was canceled at her request after she learned that the Cannabis Control Board (CCB) planned to consider only five cultivators, two microbusinesses, three processors and three retailers for licenses. At the time, Hochul indicated that she expected regulators to greenlight roughly 400 new licenses at the meeting.