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Amid ongoing litigation casting doubt on New York’s adult-use cannabis business licensing process, a judge has allowed just a few dozen dispensaries into the market—for now.
TONY LANGE | AUGUST 24, 2023
Access to adult-use cannabis hasn’t come swiftly in New York, and now only 30 more dispensary licensees are able to launch their retail businesses under an injunction in the state’s Albany County Supreme Court. Another 410 approved retail applicants are left high and dry in the interim. This interruption to an already sluggish program rollout stems from a lawsuit filed Aug. 2 by four service-disabled veterans who argue the New York Office of Cannabis Management (OCM) violated state cannabis law—the Marihuana Regulation and Taxation Act (MRTA)—in its exclusion of licensing opportunities to them and other groups. Five days later, on Aug. 7, state Supreme Court Judge Kevin Bryant issued a preliminary injunction blocking OCM state regulators from awarding more licenses or approving dispensary openings for those hoping to stand up their businesses. This meant 440 of the 463 conditional adult-use retail dispensary (CAURD) licenses awarded to social equity applicants since late 2022 had their grand openings put on hold. The other 23 CAURD licensees have already opened their retail operations since the state first launched commercial sales nearly nine months ago. That’s 23 businesses—18 dispensaries and five delivery operators—tasked with fending off the illicit market and serving the demand for legal cannabis in a state of roughly 19.5 million people. However, following an initial hearing, Bryant announced Aug. 18 an exception in the temporary restraining order for CUARD awardees who could demonstrate irreparable economic losses to their investments and who “met all requirements for licensing, including but not limited to site plan approval from the [OCM’s Cannabis Control Board] and, where applicable, from local municipalities” prior to the Aug. 7 injunction. “This court has provided a process whereby individual licensees can establish that they should be exempt from the injunction based upon their unique circumstances,” Bryant wrote. Four days later, on Aug. 22, the court released a list of 30 CAURD licensees who met the criteria to be exempt from the injunction, meaning the 440 licensees affected by the preliminary order were lowered to 410. Deliver optimized light levels in the right spectrum to your light-loving cannabis plants with Philips LED toplighting compact. Multiple spectral options including our new Efficient Broad White, to optimize growth for every stage: veg to flower to mother. Covered, protected diodes are easy to clean, ensuring consistent light output.
Aurora Wood, CEO of The Highest Peak LLC, one of the 30 CAURD licensees to be exempt from the injunction, filed an affidavit to the court Aug. 18 outlining her equity interest in the dispensary she plans to open in Potsdam, N.Y., about 15 miles south of the Canadian border nearest to Ottawa. After paying the $2,000 CAURD application fee, The Highest Peak received a provisional license in January 2023. “My business partners and I spent many hours researching the applicable OCM regulations and guidelines and identifying a suitable commercial real estate location,” Wood wrote in the affidavit. “We have also spent a very large amount of our personal savings, totaling over $75,000, for business development and launch costs.” Once she and her partners found a suitable commercial real estate location, they negotiated with the landlord and executed a commercial lease, by which they are now bound, Wood said. “My partners and I have refocused our careers on opening this dispensary instead of our prior jobs, as we anticipated opening in the near future,” she wrote. “Additionally, we have already extended 15 job offers to candidates, and many of them are relying on a timely opening of the dispensary for their next paycheck.” Wood said she and her partners cannot recoup their investment until their dispensary opens and that her business may have to declare bankruptcy—not an easy task in the federally illegal cannabis space—if retail operations do not commence in a timely manner. Anthony Crapanzano, who holds an equity interest in BCPSI Enterprises LCC (doing business as Highstone), also filed an affidavit with the court. Crapanzano was among the first 36 approved CAURD applicants in November 2022 and was also among the 30 CAURD licensees to be exempt from the current injunction. In his affidavit, Crapanzano included an itemized list of more than $1.2 million in investments he and his partners made toward becoming operational. “Respectfully, my partners and I bear a far greater burden under this [temporary restraining order] than the plaintiffs do without one,” he wrote. “Plaintiffs had over a year to challenge this lawsuit and seek an injunction over the CAURD program, yet those chose to wait until almost a year after the application period opened.” While Bryant granted relief to 30 aspiring cannabis businesses like The Highest Peak and Highstone, the fate of the other 410 businesses remains unclear. Litigation is ongoing. Notably, the plaintiffs argue, MRTA states that the OCM’s Cannabis Control Board’s duties are to ensure “that the initial adult-use cannabis retail dispensary license application period shall be opened for all applicants at the same time.” In his Aug. 18 decision on the merit of the lawsuit, Bryan wrote that the “plaintiffs have presented persuasive and compelling authority in support of their argument that [OCM] failed to follow clear language of the applicable legislation.” This is not the only court case to challenge—and halt—the rollout of an adult-use cannabis market in New York. Bryant pointed to a different lawsuit filed in September 2022 by Variscite NY One Inc., which applied for a CAURD license but was unsuccessful in the awarding process because the company was 51% owned by an individual who has a cannabis conviction under Michigan law and “has no significant connection to New York.” That litigation included an injunction blocking cannabis retail licenses from being approved in five of 14 designated regions in New York. Bryant wrote that OCM state regulators “decided to move forward and accelerate the CAURD program in the face of unresolved litigation and they were undeniably on notice of the alleged constitutional defects at issue. Despite this notice, defendants encouraged potential licensees to incur significant expenses in reliance on a program that defendants knew was at issue in pending litigation. In this regard, there certainly is merit to the argument that defendants created much of the very harm that they now assert in support of their argument.” Through the growing pains of OCM’s Seeding Opportunity Initiative—a program focused on licensing those with cannabis-related convictions and nonprofit organizations that assist or provide services to these individuals—as well as the litigation that has followed with regard to omitting other social and economic equity applicants from the process, New York’s adult-use program has fallen short of its legalization peers with respect to providing widespread access to regulated and tested cannabis products. Through the first six months of 2023, licensed dispensaries reported $33.4 million in adult-use cannabis sales, or about $5.6 million per month in a state of roughly 19.5 million people. That comes out to an average monthly spend of 29 cents per capita. The average monthly spends per capita nationwide among all states that have launched commercial adult-use cannabis programs is $12.30, more than 40 times as much as New York, according to a Cannabis Business Times market analysis.