A State Supreme Court judge will hold a hearing Friday on a challenge to the state’s retail cannabis licensing rules, which has brought New York’s troubled recreational marijuana rollout to a halt.
Earlier this month, Judge Kevin Bryant issued an injunction barring the state Office of Cannabis Management, or OCM, from licensing any new retail cannabis stores after four service-disabled veterans brought a lawsuit, saying that they were unfairly left out of the first round of awarded licenses.
The four argue that, according to the 2021 Marihuana Regulation and Taxation Act, which legalized adult use of recreational cannabis in New York, the first retail licenses were to go to people convicted of a marijuana-related offense, veterans who incurred a disability due to their war service, minority- and women-owned businesses, and financially distressed farmers.
The veterans say OCM diverged from the statute when they set up rules that limited the first round of licenses to people with previous marijuana-related convictions.
Judge Bryant agreed, ruling that since the Legislature did not amend the original law to alter that first category of licensees, there’s a “significant likelihood” that the four veterans will ultimately win their case. He ordered all new retail licenses to be put on hold until the case is decided.
Opponents of the lawsuit include Osbert Oduna, a retired Marine and service-disabled veteran who runs a cannabis delivery service in Queens.His business partner was convicted of a marijuana-related offense during prohibition. Orduna, who has been conditionally approved for a license for a retail location, but has not yet opened a store, is against the lawsuit, saying it only stalls an already impeded process, and has a “chilling effect” on the fledgling industry.
“I'm opposed to anything that puts us versus them,” Orduna said. “Us being one social equity group against another.”
He says the licensing application process would have opened to the other groups, including the veterans and women- and minority-owned businesses, on October 4, but that’s now also likely on hold due to the injunction.
The lawsuit is not the only factor that has slowed the legal cannabis rollout, and two years in, only 24 stores have opened out of around 160 outlets that were supposed to be up and running by now. Many in the struggling industry are increasingly concerned.
Hal McCabe is the interim director of the Cannabis Association of New York, or CANY, which represents small-scale, locally based growers and retail sellers. He is also the mayor of the village of Homer, which is seeking to locate a retail outlet in the village and the nearby city of Cortland.
“It's unfortunate. This is possibly the worst thing that could happen to the small businesses and startups,” McCabe said. “Because it's frozen them in place, and it's frozen the supply chain.”
McCabe says small-scale farmers who were granted growing licenses last year grew 300,000 pounds of cannabis, and to date, only around 18,000 pounds have been sold. He says many are in danger of bankruptcy.
McCabe and Oduna believe that the delays will benefit the large-scale operations that currently sell medical marijuana in New York and operate large, efficient, indoor growing spaces.
Oduna says if the OCM follows its current rules, then the large companies will be eligible to apply for licenses in December.
“They're also going to be winners here,” said Orduna, who said the large operations can just “flip the switch,” and devote half of their existing retail space to recreational sales.
CAN's McCabe says he believes that state lawmakers, the governor, and even the OCM have had the best intentions in trying to “right some wrongs” and give the first licenses to people most adversely affected by cannabis prohibition.
However, said McCabe, "the rollout has been ham-fisted at best, and it's kind of just, it's a little bit strange to me that we have all the time, all the money, and the market, and the experience of all the other states who have gone before us to lean on. And we've still managed to screw this up.”
He says, meanwhile, an estimated 3,000 illegal, unlicensed cannabis dispensaries are thriving.
The judge did make some exceptions to the injunction. Conditional retail licenses granted before August 7, when the lawsuit was filed, can go forward. Those approved after August 7 will be evaluated by the judge on a case-by-case basis. OCM has until the end of the day, Thursday, August 24, to submit that paperwork.
In a statement, OCM’s Taylor Randi Lee says the agency is “disappointed” with the judge’s decision, but is “proud” to work towards the goal of establishing “a first-of-its-kind, adult-use cannabis market that works to right the wrongs of the past.” Lee says OCM is applying to the Court for exemptions from the injunction “on behalf of provisional licensees who are ready to open.” Lee says the agency won’t let the court case “derail” its efforts.
A hearing will be held in Kingston on Friday, August 25.