New York Cannabis Coalition Sues State Over Recreational Market Rollout

A group of businesses, hopeful cannabis entrepreneurs, and at least one medical marijuana-supporting physician has filed suit against the state of New York and its cannabis regulators, calling for recreational retail licensing to be opened up immediately to all stakeholders.

The suit accuses regulators of acting in contravention to state law, deliberately “turning a blind eye” to illicit market activity, and allowing “thousands of illicit retailers” to take control of the state marijuana market.

The lawsuit was filed by the Coalition for Access to Regulated and Safe Cannabis (CARSC), an “unincorporated trade association.”

The lawsuit, which had been hinted at more than once in recent months by business interests that have so far been largely shut out of New York’s adult-use market, alleges that the state Office of Cannabis Management and the Cannabis Control Board broke state law by awarding the 66 retail licenses issued to date only to social equity applicants.

It’s the latest legal action that could throw a major wrench into New York’s adult-use retail licensing, some of which has already ground to a halt thanks to a separate lawsuit, which resulted in an injunction late last year, preventing the OCM from granting cannabis shop permits in five regions across the state. That case is ongoing.

The new suit was filed Thursday in the Albany County Supreme Court.

“For those parties that want a legal and regulated marketplace, the current state of the cannabis market in New York is unacceptable,” David Feuerstein, an attorney for the CARSC, said in a press release. “Regulators have neglected their responsibilities to enforce the MRTA as written and instead focused on high-minded policymaking – a role that is reserved for our State’s elected officials.”

“It is critical that we stop the CCB and OCM from continuing to unconstitutionally legislate and compel them to start implementing the law that was enacted by the Legislature,” Feuerstein said. 

The suit contends that regulators were bound by state law to issue them “for all applicants at the same time.”

However, the OCM and CCB created the conditional adult-use retail dispensary (CAURD) program for eligible social equity applicants and “postponed indefinitely the licensing of hundreds of additional dispensaries necessary to satisfy consumer demand,” the suit says.

“As a result, (the OCM and CCB) have allowed New York’s illicit market to flourish, putting medical patients and adult-use consumers at risk and robbing communities impacted by the War on Drugs of critical tax revenue,” the suit reads.

To date, there are just four licensed and operational recreational cannabis shops in New York.

The legal action alleges regulators have:

• Taken nearly two years to promulgate recreational marijuana industry regulations.
• “Routinely violated” state law with “ever-changing … guidance documents to regulate cultivators and processors.”
• Pledged financial help and real estate to CAURD applicants that so far has not materialized.
• “Induced” the state’s 280 licensed adult-use cannabis farmers “to grow 350,000 pounds of flower in 2022 without creating an adequate retail infrastructure to sell it.”

Not only that, but it alleges that regulators deliberately refused to crack down on unlicensed cannabis sales and asserts that the OCM and CCB could do much more than they have to date.

The suit requests a court order to throw out the qualifying criteria for CAURD licensure, force regulators to crack down on the illicit cannabis trade, and “open the adult-use retail dispensary licensing window for all applicants immediately.”

The lawsuit also accuses regulators of having “waged a thinly veiled attack against the registered organizations” that comprise the 10 existing medical cannabis companies in New York. At least some of those companies are members of the coalition that filed the lawsuit, including Acreage Holdings, Curaleaf, Green Thumb Industries, and PharmaCann. Those companies currently are prohibited from participating in the adult-use market for three years.

Curaleaf Executive Chairman Boris Jordan warned in late January that his company and others may file suit against the state over the regulations.

“New York at my last count has violated 8-10 of their own laws with the launch of this program,” Jordan said at the time. “So if people take them to court, they’re going to lose.”

The rollout was also criticized in a report commissioned by Acreage Holdings that was released this week.

“The state tried to initiate an inclusive cannabis market based on restorative justice for those historically impacted by the War on Drugs; unfortunately, the delayed licensing rollout put the state’s legal industry in a precarious position as illicit actors fill the vacuum and serve consumers,” Bryan Murray, executive vice president of Acreage’s government relations arm, said in a statement.

“New York is expected to be one of the largest cannabis markets in the U.S. There is room for all players, and New York has a full bench of players ready to play the game. Why won’t they let us help them win?”

The lawsuit also expounds on the pains the R.O.’s such as Curaleaf have gone to in the New York medical marijuana program, with the expectation they’d be in line for recreational market licensure quickly when the new opportunities came along last year.

The 10 companies “have invested tens of millions of dollars over the past eight years in order to produce a sufficient supply of pharmaceutical-grade cannabis to serve New Yorkers,” the suit contends. “Arresting their entry into the adult-use market inflicts ongoing injury to their business and imperils their bottom line.”

A spokesman for the OCM declined to comment on the suit.