Office of Cannabis Management announces additional licenses in Long Island region in response to court injunction
The New York Office of Cannabis Management initially announced it would award 175 adult-use retail licenses to Conditional Adult-Use Retail Dispensary (CAURD) applicants in specific regions, providing 25 licenses to nonprofit groups who serve those who have been impacted by the drug war and 150 licenses to “justice involved” individuals directly impacted by the War on Drugs. On March 2, 2023, the NY OCM Cannabis Control Board announced it would be increasing that number to 300.
Recognizing the devastating impact the War on Drugs and the state’s “stop and frisk” policy historically had on its constituents, Governor Kathy Hochul responded by creating the country’s first cannabis social equity model, by awarding licenses to those who have been convicted of a cannabis charge in the state of New York or to nonprofit groups directly serving those who have faced convictions. Other states have attempted to prioritize legacy operators or those convicted of non-violent drug offenses but none, thus far, have implemented a strict model of mandating such convictions as a requirement.
Many in the cannabis activist community applaud the efforts of the OCM while other industry groups — particularly multi-state operators and those in the finance and consulting sectors — condemned these policies. The OCM rules prohibit those with ownership in cannabis businesses (even consulting) outside of the retail sector to provide services in the local industry, thereby ensuring the consistency of the non-vertically integrated model and safeguarding the state’s newly emerging cannabis industry. The assignment of licenses to specific regions was designed to prevent over-concentration and to reflect the population of each region.
But as of January, licenses have not been issued in every region.
The explanation lies with a federal judge who sided with a Michigan company that claimed New York State’s process of issuing retail marijuana licenses is discriminatory against applicants who live out of state. U.S. Senior District Judge Gary L. Sharpe found that New York State’s law and regulations governing the CAURD licenses and application process likely violate the U.S. Constitution’s Dormant Commerce Clause, which prohibits state law from unduly restricting interstate commerce.
Similar claims have been filed in other states, with contradictory rulings depending on the judge and the specifics of state law.
In addition, on March 15, 2023, a complaint was filed in Albany County Supreme Court alleging unconstitutional overreach and policymaking. The party that filed the suit calls itself The Coalition for Access to Regulated & Safe Cannabis and is made up of the MSOs Acreage Holdings, PharmaCann, Green Thumb Industries and Curaleaf, as well as two hopeful dispensary owners, one in Brooklyn and another in California.
The ruling from Judge Sharpe blocks the OCM from issuing licenses in the Finger Lakes, Central New York, Brooklyn, Mid-Hudson and Western New York regions, blocking the issuance of 63 adult-use retail licenses.
The ruling has deep economic impacts to the newly licensed producers who were expecting to sell their products to CAURD licensees in the above-mentioned regions, as the anticipated number of retail outlets, and therefore wholesale transactions, is rendered moot by the ruling.
A possible solution is for the OCM to award additional licenses to nonprofit groups, who are already permitted to establish anywhere in the state, filling the gap created by the court ruling and relieving pressure the OCM is under from production and supply chain licensees to ensure a viable market.
There are several local municipalities that have opted out of the program, particularly in the competitive Long Island region, where all but four municipalities opted out of the program, banning all cannabis dispensaries in their borders. According to data gathered by the Rockefeller Institute of Government, as of February 16, 2023, out of the 1,520 municipalities in the state, 754 have opted out, almost half.
On November 21, 2022, the first round of adult-use retail licenses, 36 in total, was approved by the Cannabis Control Board. Nonprofit and minority/women owned businesses were prioritized.
On December 21, 2022, the board awarded CAURD licenses to processors, cultivators and testing labs only. On January 25, 2023, the board approved an additional 30 adult-use retail licenses, among them was Long Island Cannabis, a justice-involved applicant majority-owned by women. Long Island Cannabis was awarded a license in the Long Island region, where most municipalities have opted out of the program, but where many market experts predict there to be the highest volume in potential retail sales.
The team at Long Island Cannabis came together through friendship and their passion for the therapeutic potential of cannabis and a shared experience of being prosecuted for their involvement in the pre-2015, underground cannabis industry. Each owner has a long history of activism in the early years of the cannabis movement. Two of the owners were arrested and charged with multiple felonies for their involvement in the industry but went on to navigate flourishing careers.
With more than 63 licenses banned from issuance, big questions remain as to when the injunction will be lifted and what the OCM will do to ensure licensed producers will have retail outlets for their products.
Editors note: Hours before this issue went to press, a federal court narrowed the scope of the injunction allowing the OCM to resume licensing in the Central New York, mid-Hudson, western New York and Brooklyn regions. The injunction remains in the Finger Lakes region.