New York court strikes down marijuana marketing rules and then judge rolls back on some of rulings

It’s been a complicated 24 hours in NY and it’ll take a little bit of time to make sense of it all

Politico has the best round up so far

They write

A New York court has struck down the state’s marketing regulations for its troubled adult-use marijuana market.

The Albany County Supreme Court ruled in favor of cannabis information website Leafly, finding the agency’s rulemaking process problematic and its regulations unconstitutionally vague and in violation of free speech rights, according to the order issued on Thursday.

The state did not present any evidence “to rebut the arguments” presented by Leafly and “nothing to establish the rationale or reasoning behind the [Office of Cannabis Management] and [Cannabis Control Board] decisions,” the order read.

The court initially tossed out a huge chunk of New York’s marijuana regulations on Wednesday, sending tremors through the state’s fledgling cannabis industry, which has already endured months of struggles due to the botched rollout of the state’s adult-use market.

But about a day after the initial order, the court narrowed the ruling to apply only to the marketing and advertising restrictions that Leafly challenged. This means that dispensaries will be able to advertise and fulfill orders on third-party platforms, while keeping the rest of New York’s adult-use cannabis rules intact. However, the ruling could set the stage for additional legal challenges for other parts of New York’s adult-use cannabis law.

More details: Leafly filed a lawsuit against New York cannabis regulators last September, challenging rules that would prevent dispensaries from marketing themselves or fulfilling orders on a third-party platform.

Other petitioners joined Leafly in filing the lawsuit, including Stage One, a cannabis dispensary in Rensselaer, New York, and Rosanna St. John, who said she relies on Leafly to make informed decisions as a cannabis consumer.

Read the rest of the article at

https://www.politico.com/news/2024/04/04/new-york-court-strikes-down-cannabis-marketing-rules-00150615

 

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Neil Wilner

UPDATE: The court issued an amended decision striking down just those regulations that Leafly challenged, and not the entire adult-use regulatory package. The handful of provisions the court determined were arbitrary and capricious and an impermissible constraint on speech include:

◼ 123.10(g)(21), prohibiting retail dispensaries from “pay[ing] for marketing or promotion through a third-party platform, marketplace, or aggregator that lists cannabis products for sale,”

◼ 124.5(a), prohibiting licensees from contracting with a “person or entity performing any function or activity directly involving the licensed activities authorized for that license type,”

◼ 123.10(g)(23), prohibiting retailers from “fulfill[ing] any order placed or otherwise acquired from the retail dispensary’s purported website on a third-party marketplace or aggregator where other retail dispensary licensees are listed, or visa-versa,”

◼ 124.1(b)(2), prohibiting retailers from entering into any agreement with TPPs that do not “list all licensees authorized for the retail sale of such cannabis products” when “advertising or listing a cannabis product,”

◼ 124.1(b)(5)(ii), prohibiting retailers from entering into any agreement with TTPs that do not redirect to the domain of a licensee authorized for retail sale of cannabis “before the price of Adult-Use cannabis products are displayed,”

◼ 124.1(c)(1)-(2), prohibiting retail dispensaries from listing their cannabis products on any TPP that does not “allow for any licensed distributor, who is willing and in good standing, to be listed as an option for logistics and transportation purposes” and “allow customers to negotiate fees for such services directly with such distributors.”

◼ Sections 123.10(g)(21) and 124.5(a) (together “the marketing regulations”) and section 124.1(b)(5)(ii) (“the pricing regulation”) violate article I, § 8 of the New York Constitution, and that the Challenged Regulations are collectively (1) arbitrary and capricious; (2) inconsistent with the Cannabis Law; and (3) unconstitutionally vague

_________________________________________________________________________________

In an incredibly broad and sweeping decision in the Leafly v. OCM litigation, it appears the court struck down New York’s ENTIRE adult-use hashtagcannabis regulatory package. Leafly challenged a handful of regulations restricting dispensaries’ use of third-party tech platforms but in its decision, the court determined that Parts 118, 119, 120, 121, 123, 124, 125 and 131 are “hereby declared unlawful and void as arbitrary and capricious.”

and then

 

NY Update*– Everybody please slow your roll! The judge in the Leafly case DID NOT MEAN to invalidate ALL of the NY adult use cannabis regulations in his order yesterday, and he has already entered the attached amended order that specifically restricts the invalidations to the sections challenged by Leafly and the other Petitioners.

See attached, which makes it clear that the only sections enjoined are the “Challenged Regulations” as defined in the Petition–

-The Third Party Marketing Ban- 9 N.Y.C.R.R. §§ 123.10(g)(21), 124.5(a)
-the Pricing Ban- 124.1(b)(5)(ii)
-the Third-Party Order Ban- 123.10(g)(23)
-the Third-Party All-Licensee Listing Mandate 124.1(b)(2), and the
-the Third-Party Distributor Listing Mandate,124.1(c)(1)-(2),
The rest of the adult-use cannabis regulations are NOT AFFECTED at all. Considering the entire first order yesterday repeatedly referred to the contested regulations before inexplicably invalidating

ALL of the regs, it was pretty clear that it was just an honest error on the judge’s part.

That being said, this order and the filings that precipitated it are another NOT GOOD look for OCM. The affidavit and arguments submitted by OCM in defense of these regulations were found by the judge to be a “post hoc rationalization of the determinations of the agency rather than a necessary showing that the agency considered sufficient evidence prior to deciding to enact the challenged regulations and that their decision was rationally supported by that evidence”.

The more evidence there is that OCM may not have fulfilled its obligations, resulting in arbitrary and capricious regulations, the MORE lawsuits we may see…..like the lawsuit that was just filed challenging the proximity protections and their implementation…

(Sigh). I cannot wait until the NY reefer regulatory rollercoaster ride turns into the NY reefer lazy river ride, but at this pace it’s going to take years.

 

The Documents

Initial Ruling

1712248370889

Amended Ruling

1712268654989

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