New York Judge Temporarily Halts New Marijuana Dispensary Licenses
Cannabis Culture store in Manhattan, New York, United States, on October 21, 2022. (Photo by Beata … [+]
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A New York State Supreme Court judge has ordered the state’s marijuana regulators to temporarily block the issuing of new dispensary licenses.
A court injunction was approved on Monday, August 7, in response to a lawsuit filed by a group of four veterans.
The lawsuit contends that the Conditional Adult-Use Cannabis Retail Dispensary (CAURD) program violates the 2019 Marijuana Regulation and Taxation Act (MRTA), establishing an equity plan.
The lawsuit filed last week argues that the CAURD program designed for entrepreneurs affected by marijuana enforcement is unconstitutional.
More specifically, the plaintiffs say that the MRTA, the legislation that legalized marijuana in New York in 2021, failed to prioritize licensing for individuals with a history of justice involvement without extending the same consideration to service-disabled veterans.
However, it’s important to take into account that New York’s marijuana regulators, the Office of Cannabis Management (OCM) and the Cannabis Control Board (CCB), have issued a total of 463 CAURD licenses under the social equity program established by the MRTA.
Nevertheless, the lawsuit states that the marijuana regulators in New York exceeded their jurisdiction by establishing a fresh licensing classification known as the CAURD program while restricting eligibility exclusively to justice-involved individuals with successful businesses.
The court has ordered the state’s marijuana regulatory bodies not to issue additional licenses and not to provide operational approval to those who have already been licensed and are in the process of establishing dispensaries. This injunction will remain in effect until a scheduled hearing on Friday, August 11.
The injunction is poised to exacerbate the delay in dispensary license issuance within the state, once again thrusting New York’s CAURD program into the spotlight of criticism and legal challenges.
With the CAURD program, New York’s marijuana regulators aim to launch the legal adult-use marijuana market by prioritizing social equity applicants. This is because the MRTA aims to allocate 50% of adult-use licenses to applicants from social and economic equity backgrounds.
Social equity applicants include individuals disproportionately affected by the War on Drugs and other marginalized groups, such as minority and women-owned enterprises, struggling farmers, and businesses owned by service-disabled veterans.
Under the CAURD program, social equity applicants—comprising individuals, non-profit entities, close family members, or dependents of those previously involved in marijuana-related offenses before March 31, 2021 (the date of marijuana legalization in the state)—are also required to demonstrate a track record of running a successful business for a minimum of two consecutive years.
However, this program has created several legal hassles for New York’s marijuana regulators.
Last year, Michigan-based Variscite filed a federal lawsuit against New York’s marijuana operators. This legal action contested the CAURD program and pursued a preliminary injunction against its licenses in specific regions of New York. Variscite contended that the program’s favoritism towards in-state operators was unconstitutional, as it hindered interstate commerce, thereby violating the dormant commerce clause. The case was resolved in May this year.
Like the group of four veterans, medical marijuana operators filed a similar lawsuit in March. They argued that giving preference to entrepreneurs with marijuana-related convictions constituted an overstep by the regulatory agencies.
However, the issuance of CAURD licenses has been delayed by more than just court orders.
New York’s regulators have faced numerous hurdles. Apart from tackling the surge in unlicensed businesses across the state, they’ve grappled with establishing the CAURD program, intended to be funded by a $200 million public-private equity fund, with $150 million from private sources. Despite nearly a year passing, the team led by NBA Hall of Famer Chris Webber, entrepreneur Lavetta Willis, and executives from Siebert Williams Shank hasn’t secured any funding.
In June, Gov. Kathy Hochul’s office announced that the state secured a $150 million investment from Chicago-based investment firm Chicago Atlantic.
Moreover, criticisms and accusations are accumulating against the Dormitory Authority of the State of New York (DASNY), which serves as the state’s entity for public finance and construction. DASNY was assigned the responsibility last year to locate, secure, and oversee the leasing of real estate for the CAURD operators, but the agency is facing several issues in securing the real estate for dispensaries.
While New York has granted hundreds of CAURD licenses, only around 20 dispensaries are operating either partially or at full capacity.
Meanwhile, thousands of unlicensed marijuana businesses thrive across the state, despite the state’s efforts to shut them down.
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