Millions of Missed Opportunities
State's CAURD program was supposed to right generations of wrong surrounding marijuana. Instead, a handful of dispensaries have made millions while others fight to get in the game.
Since New York's CAURD application window opened Aug. 25, 2022, the program has been underfunded and repeatedly stalled.
Omar Price was born on the bathroom floor of apartment 82-J at Ferry Grider Homes public housing in Buffalo.
He’s a Black man who grew up in poverty and in a community that was over-policed: He used to get stopped and strip-searched by police who claimed to be looking for marijuana.
“We were exposed to the war on drugs,” Price said. “It wasn’t uncommon for me to go to the candy store and be told by police to pull my pants down in the street to be searched. And I’m one of many that this happened to.”
Those civil rights violations are among the wrongs that the state’s Conditional Adult-Use Retail Dispensary license program intended to make right. The social equity program, designed by the Office of Cannabis Management, sought to give the first legal weed dispensary licenses to applicants with a marijuana-related conviction and experience running a profitable business.
The program promised turnkey dispensary locations, low-interest loans and hope of financial prosperity for people most impacted by the prohibition of marijuana. But since the application window opened Aug. 25, 2022, the program has been underfunded and repeatedly stalled. Plus, the state’s marijuana law states that the process should be open to “all applicants at the same time,” prompting lawsuits and injunctions.
Price, an attorney whose company 82-J Cannabis has a provisional CAURD license, is stuck in the middle, since an August injunction prevented additional dispensaries from opening.
“I came back here trying to find the people I grew up with who were impacted by over-policing,” Price said during a recent interview in the courtyard next to his childhood home, which inspired his company's name. “I thought, 'This is a good opportunity to change our lives.' ”
New York's CAURD program has only helped a few, so far
The CAURD program was intended to give justice-involved individuals first dibs on what was expected to be a lucrative market, but that has been the case for only a select few.
Due to a lack of competition, the 23 dispensary owners that were able to open statewide through August collectively made more than $70 million by the end of that month, according to the OCM.
Damian Fagon, chief equity officer of the OCM, said few of the hurdles that prevented CAURD from living up to its promised potential — finding capital and real estate, for example — were expected.
“Ninety percent of small business owners in this country fail,” he said. “The challenges are a combination of the general business challenges facing small businesses, and those unique litigation and regulatory challenges that are specific to cannabis. I think the combination of those was kind of shocking to some of our license holders, as well as the general population in New York that hasn’t really paid attention to other legal cannabis market rollouts.”
Price and his two business partners, Nick Hall and Ron Atkinson, appeared to be the type of applicants for which the CAURD program was created. Atkinson, who was arrested at 17 for selling weed, worked in retail most of his life. Hall runs his own landscaping business.
When they got a provisional license, they went all-in preparing for the new business and securing a lease. Atkinson even quit his retail job to focus his full-time attention on 82-J.
“I thought it was a lifestyle opportunity,” Atkinson said. “I’ve always been in and out of the marijuana business, and I thought I could put some of these skills to use now. I could provide for my family.”
Their plans came to a halt Aug. 7 when a state Supreme Court judge issued an injunction against additional dispensary licenses as part of a lawsuit filed by service-disabled veterans who intend to apply for licenses.
Now, 82-J Cannabis and more than 400 provisional license holders are in limbo, unsure if or when they’ll be able to launch their businesses.
Those CAURD success stories have been 'tremendously lucky'
On the other side of the story is Aaron Vancamp, who was able to open Dank 716 on Main Street in Buffalo between the first injunction, which was lifted in April, and the most recent one.
“A lot of things fell into place for us,” said Vancamp, whose dispensary opened July 18. “I got tremendously lucky as far as zoning, and we were allowed to get open."
The second injunction actually worked in his favor, because it kept competitors from opening. Dank 716 and Herbal IQ in Depew are the only legal stores open here.
"We’re in the vicinity of $2 million gross revenue" since opening, he said. "This is a dream-come-true status. I think everyone who got open, as far as a retail location in CAURD, they’re probably a millionaire, if they have 100% TPI," or true party of interest, or ownership.
That doesn't mean Vancamp is happy about the state of the industry.
“We’ve done very well from this, but all of my friends are miserable, and I have people saying they hate me and that I don’t deserve it,” said Vancamp, who spent six years in jail for selling marijuana. “People ask, ‘How’d you get it?’ We scored high, I had an arrest, and it was based on where I lived, where the arrest happened, and when we filled out the application.”
First lawsuit hits as CAURD application window closes
CAURD’s first hurdle came on Sept. 26, 2022 — the day the application window closed. Kenneth Gay, a Michigan resident and majority owner in Variscite NY One, filed a lawsuit after his application was rejected. The lawsuit argued that the program was unconstitutional, violating protections of interstate commerce. An injunction was granted in five regions including Western New York.
By the time the state settled, offering Variscite a license and lifting the injunction, another lawsuit had been filed by the Coalition for Access to Regulated and Safe Cannabis. The coalition is a group led by medical registered organizations like Acreage Holdings and PharmaCann, which wanted the license applications to be open to everyone.
The plaintiffs’ attorney, David Feuerstein, said the case argued that the OCM violated the state’s constitution regarding separation of powers when it created its own CAURD rules that violated the Marijuana Regulation and Taxation Act passed in 2021.
“The message that the OCM is trying to push out is that somehow the (medical registered organizations) are this evil group of actors looking to monopolize New York’s cannabis industry,” Feuerstein said. “But it’s nonsense from almost every way you can think of it. The ROs are almost exclusively multi-state operators, but why is that such a bad thing? Every other state allows for them. The legislation already prohibits the ROs from dominating the marketplace, so what’s the concern?”
Medical cannabis has been legally available to New Yorkers through the state's medical marijuana program since 2014. There are about 40 registered medical cannabis dispensaries statewide. Meanwhile, the state is expected to approve a statewide retail market of 1,500 dispensaries, Feuerstein said.
State law only allows medical cannabis companies to operate four dispensaries. Under the MRTA, those companies can transition three of those to adult-use. The state was going to make Registered Organizations wait three years before transitioning to adult-use, but following a public comment period on those regulations, the state eliminated that stipulation.
Veterans allege they were passed over as social equity priority
The most recent blow to CAURD was an August injunction that followed a lawsuit by four veterans, alleging the program violated the MRTA when it passed over disabled veterans. Service-disabled veterans were specifically mentioned in the MRTA as being a social equity priority, along with distressed farmers, individuals who live in areas disproportionately impacted by the war on drugs, minority-owned businesses and women-owned businesses.
With the help of attorney Jorge Vasquez, Price and his partners served as “interveners” in the case. The court ended up lifting the injunction on a case-by-case basis for licensees who had all of the approvals from the OCM to open, but 82-J Cannabis wasn’t one of them. The owners are waiting on a certificate of occupancy from the City of Buffalo for their location.
The onslaught of litigation wasn’t unexpected, Fagon said. Other legal states — Arizona, Illinois, Maryland, Massachusetts and Michigan — had lawsuits and delays for years, he said. Massachusetts opened its first store two years after legalization, and Vermont just opened its first dispensary four years after legalization.
“People in the (cannabis) space use litigation for tactical advantages," Fagon said. "That’s been a trend in the industry that’s gotten worse over the years.”
Fagon said that litigation is especially expected around more progressive social equity-centered programs.
“They are intended to scare regulators and public officials away from pursuing those objectives,” he said. “In the face of ongoing litigation, it’s not going to work. We still have a statutory mandate to prioritize these communities regardless of what legal threats exist out there. We do intend to keep pursuing the protection of some of our licensees through the court system with the judge.”
Funding was an issue, as were turnkey locations
The promised turnkey dispensary locations and loans for the first 150 CAURD licensees were part of Gov. Kathy Hochul’s Seeding Opportunity Initiative. Hochul established a $200 million Social Equity Cannabis Investment Fund, for which the Dormitory Authority of the State of New York is a minority limited partner, according to DASNY spokesperson Jeffrey Gordon. The goal was to raise $150 million in private investment by September. She promised a $50 million match from the state.
DASNY then put Social Equity Impact Ventures in charge of managing the fund and raising capital. For nearly a year, they struggled to raise any money or find turnkey locations, according to a series of reports from Brad Racino with NY Cannabis Insider in Syracuse.
They did, eventually, but the resulting loans were "non-recourse loans," for which the licensees would have to pay 13% interest over the next 10 years. They're also secured against the real estate of the dispensary.
"The fund will make efforts to support the licensees to avoid default," Gordon said in an email. "After those efforts are exhausted, the licensee may be at risk of losing possession of the site."
Gordon said that about $27 million in design and construction costs have been approved from that fund, and 10 design and build firms “were engaged for dispensary build out, with eight firms in active construction activity with construction completed at several sites.”
Twenty-four leases have been signed so far, he said, and five are or will be open soon. Following more openings this month, the OCM's website states there are 21 dispensaries open and five more operating as delivery only.
Even before the funding came in and sites started opening, some CAURD licensees were hesitant to trust loans from the state and pursued sites and capital on their own. Vancamp was one of them. He was able to secure a lease and capital to get Dank 716 up and running in about four months.
“Far more people were depending on that money than what was anticipated,” he said. “And I think a lot of people were misinformed on the amount of money they would need to get open.”
Funding comes, but is it too little, too late?
Many CAURD licensees have already invested life savings, taken loans, signed leases and quit their jobs to make this dream a reality. For them, this funding could be too little too late, especially since the entire program was halted with another injunction.
Jayson Tantalo and his wife, Britni, founded the NY CAURD Coalition “out of necessity,” to connect applicants to each other. They also applied for a CAURD license for their Rochester business.
“All these things that were promised were not happening,” said Britni Tantalo, adding that 85% of the CAURD Coalition members are in a minority group.
“They’re harming the very people they said they were going to help,” she said. “There’s also a mental and emotional strain. Most of us have endured losses in our current businesses because we were put through so much.”
Britni said one of the greatest devastations to the CAURD program happened was that it wasn’t codified into the legislation, like the Adult-Use Conditional Cultivators and Processor licenses were in 2022. She argued that if the CAURD program had been written into legislation, it wouldn’t have been subjected to as much litigation.
The CAURD Coalition started a petition, which has more than 950 signatures, asking Hochul for a special legislative session to codify CAURD.
“Without codification, the CAURD program will continuously be attacked and threatened, if it survives at all," said Jillian Dragutsky, a CAURD applicant and co-chair of the CAURD Coalition’s women’s committee, during the Cannabis Control Board’s September meeting. "There's a real risk that CAURD and all of us who followed the rules, regulations and guidance will potentially be ruined financially, emotionally and mentally.”
Fagon said CAURD didn’t need to be codified, because the MRTA gave the board a "wide scope" to launch the market.
“There are statutory elements of the MRTA that give the board broad authority in creating new classes of licenses and this overarching statutory mandate to pursue equity for populations harmed under prohibition,” he said.
What comes next for the CAURD program?
Fagon said the OCM is hopeful that opening the industry to anyone with the general adult-use licensing will satisfy some of the litigation and allow CAURD locations to continue opening.
The OCM submitted 30 CAURD locations that were ready to open to the judge in August, and recently, they've been able to do compliance checks and walkthroughs at more than 12 of them.
"Beyond that 30, there’s probably another 30 that have active leases that we hope to move through this process over the next month," Fagon said.
Still, the OCM put out guidance to the provisional CAURD licensees that they might want to apply for the general license, "due to the pending litigation challenging the validity of the CAURD program." Applicants that fall into the categories to be social and economic equity certified will receive a 50% reduction in application and licensing fees.
An OCM map of communities disproportionality impacted by the enforcement of marijuana laws shows the East Side has been the primary target since 2006.
While Price hasn’t given up on the CAURD program, the team behind 82-J Cannabis plans to submit a social equity application for the general license. For Price, it’s difficult to look back on the first year of the CAURD program and not believe that systemic racism and greed had a lot to do with the setbacks and litigation.
“There’s no program in this nation that looks like this,” he said. “Systemic racism supersedes a lot of these agencies involved.”
While Fagon said he couldn't comment on the specific pending litigation involving New York's cannabis rollout, he spoke about issues in the federal landscape that shine a light on systemic economic and racial injustice, like student loan forgiveness and affirmative action.
"There is a grand tradition in the United States of using the courts to prevent any acknowledgment of past harm against minority populations and low-income Americans," he said. "The legal system has been crafted in many ways to benefit incumbents and those in power. ... These are structures that exist for very specific reasons and are intended to continually marginalize certain communities."
Fagon said he's asked himself many times if it's fair to put people from these communities through the litigation though, potentially causing them more harm.
"I have struggled with that, but I've come to the conclusion that this is the work that needs to happen," he said. "I think we’ll be more transparent going forward about the potential risks involved with pursuing these opportunities."
