New York’s Regulators Settle Lawsuits Over Legal Marijuana Licensing

New York’s Regulators Settle Lawsuits Over Legal Marijuana Licensing

New York's Cannabis Control Board has announced it approved settling the ongoing lawsuits over the marijuana licensing that hindered regulators from issuing new licenses.

As anticipated two weeks ago, the agency voted to endorse a settlement addressing two lawsuits on Monday, November 27, effectively ending a three-month hiatus on the opening of adult-use dispensaries statewide.

The agreement will reinstate the Conditional Adult-Use Retail Dispensary (CAURD) licensing program. This program prioritizes individuals with prior convictions related to marijuana offenses and those directly impacted by the war on drugs, providing them with the initial opportunities to sell cannabis legally.

The program was challenged in August following a lawsuit from four service-disabled veterans who stated that they were unlawfully barred from applying. They echoed the arguments presented in a lawsuit filed in March by a coalition of the state's medical cannabis companies. The proposed settlement aims to conclude both lawsuits.

The settlement of all lawsuits over New York's marijuana licensing program will allow 436 retail license holders entangled in the legal proceedings to gain the ability to open shops and commence deliveries. Furthermore, regulators would have the authority to issue additional licenses.

Now that the CCB has unanimously approved the settlement, the parties suing are expected to submit the agreement to the Ulster County state supreme court within a day, for the judge to give it the green light.

This represents a significant step forward for New York to initiate its legal marijuana market. The process has faced substantial delays since the state legalized marijuana in March 2021, with the first legal dispensary opening in December 2022.

This delay paved the way for thousands of unlicensed shops to emerge across the state, selling cannabis products and flourishing in the absence of legal dispensaries, with the state struggling to crack down on them.

The unlicensed dispensaries operating in the gray market might divert up to $1 billion annually from the legal market until 2030, which could result in a loss of around $2.6 billion in tax revenue over the next seven years, according to an exclusive report obtained by Forbes.

The CAURD program has faced various challenges, including funding and bureaucratic hurdles. Subsequently, New York's marijuana regulators opened the licensing process to a broader range of applicants, including multi-state operators, in an effort to enhance the legal market.

Additionally, increasing the number of dispensaries is crucial to alleviating a bottleneck that has led to most of the state's 600,000-pound cannabis stockpile remaining unsold in storage facilities, according to The New York Times. This situation has left some farmers and aspiring retailers facing severe financial difficulties.

As of today, only 27 licensed shops and delivery services are currently operational across the state. This figure significantly falls short of the state's goal, set last year, to have 150 dispensaries open this year.

However, the risk of being subjected to a new lawsuit remains among regulators, as the CAURD program has shown sensitivity to challenges.

Before settling the two lawsuits, New York had already resolved a separate one involving the Michigan-based company Variscite in May. That legal matter originated from OCM's rejection of a CAURD license for Variscite last year. In the lawsuit, the company, which had applied for the program with one of its companies established in New York, argued that the program violates the Dormant Commerce Clause, which prohibits states from enacting legislation that discriminates against or unreasonably burdens interstate commerce.

The settlement concluded a court injunction that had previously restrained the state from issuing CAURD licenses to businesses in the Finger Lakes region.

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Region: New York

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