New York Regulator Sued by Medical Operators

Foley Hoag LLP – Cannabis and the Law

The only guarantees in life are death, taxes, and cannabis lawsuits, and New York is no different. In a cannabis marketplace plagued by fits and starts, the New York Cannabis Control Board (“CCB”) Office of Cannabis Management (“OCM”) have been joined to another lawsuit alleging that its actions to date are ultra vires.

The Coalition for Access to Regulated and Safe Cannabis, an unincorporated trade association consisting of Registered Organizations (vertically integrated medical cannabis permit holders), individuals that planned to pursue adult-use dispensary licenses when the widow first opened, and physicians whose practices have suffered because of OCM’s purported neglect of the medical program. The lawsuit alleges “unconstitutional overreach”, “egregious abdication of duties”, and committing actions that put “New Yorkers’ health and safety at risk.” The complaint alleges that the CCB and OCM are “imposing their own policies” rather than following what was required of them in the 2021 Marijuana Regulation and Taxation Act (“MRTA”). The complaint points to language in the MRTA directing the CCB and OCM to open “the initial adult use retail dispensary license application period . . . for all applicants at the same time.” Instead, the lawsuit argues, CCB and OCM created the Conditional Adult-Use Retail Dispensary program (“CAURD”), which introduced a new license category and limited the eligibility of licensure to a specific group. The lawsuit ultimately seeks the following relief:

  1. Declaring the CAURD license an ultra vires and unconstitutional licensing category.
  2. Declaring the qualifying criteria for the CAURD license category arbitrary and capricious.
  3. Compelling OCM or CCB to pursue civil injunctions against all illicit cannabis stores, refer to the Attorney General’s Office the names of all illicit cannabis stores advertising THC products cited in the NYMCIA Report for further legal action, and opening the adult-use retail dispensing license window for all applicants immediately, including for all the social and economic equity applicants specified in the MRTA and for Registered Organizations.

This lawsuit comes on the heels of a report finding that despite projections valuing New York’s cannabis market  at $5-$7billion, limited access to the market is stifling growth and delaying absorption of the illicit market. The report found that despite New York’s current adult-use existing and proposed regulations:

  1. Illicit market operators capture $7.2 billion in revenue between 2023 and 2030 due to the lack of legitimate retail outlets.
  2. New York will see a loss of up to 20,600 direct cannabis and ancillary jobs per year.
  3. New York will see more than $2.6 billion in state tax revenue lost over eight years.
  4. New licensees will open during great supply chain uncertainty causing needless operating risks.

By way of reminder, this is not the first lawsuit against CCB and OCM regarding its roll-out of the adult-use program. The United States Court for the Northern District of New York has already issued a preliminary injunction in Variscite NY One v. New York, enjoining a portion of the CAURD program, ruling that the program “will have a discriminatory effect on out-of-state residents seeking a CAURD license.”

Originally Published At JD Supra

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