Judge Issues New Block On New York's Cannabis Retail License Program, Leaving Industry 'Disheartened'

The uncertainty over the future of New York's legal recreational cannabis program has grown even deeper after a court injunction barring the state from processing applications for operators.

Albany County Judge Kevin Bryant issued a preliminary injunction Friday morning, preventing the New York state Office of Cannabis Management from issuing approvals for new licenses or operations for existing licensees. 

The ruling came as the result of a lawsuit filed earlier this month by four disabled veterans against the OCM and the state’s Cannabis Control Board, arguing that New York’s law allowed for social equity applicants but that the OCM had overstepped in creating a priority licensing program for individuals whose lives have been adversely affected by a marijuana conviction.

Days later, the judge placed a provisional hold on operations in New York state over the licenses, known as Conditional Adult-Use Retail Dispensary licenses. On Friday, Bryant strengthened that hold by issuing a temporary injunction, citing the plaintiffs' "likelihood of success" with their complaint.

As part of the ruling, Bryant wrote that the injunction wouldn't apply to licensees who, "prior to August 7, 2023, met all requirements for licensing, including but not limited to site plan approval from the [Cannabis Control Board] and where applicable, from local municipalities."

Bryant ordered the OCM to provide a list of CAURD licensees who the agency believes should be exempt from the injunction no later than Tuesday. 

Robert DiPisa, a member attorney at Cole Schotz, said in an interview Friday evening that it is unclear which licensees may be exempt from the injunction.

“They're not giving you a comprehensive list of exactly what qualifies you as being included as someone who the preliminary injunction doesn't apply to,” he said. “What other things are they referring to?”

For licensees who are in the process of getting businesses ready to operate, hiring subcontractors and securing materials, the injunction — issued a week earlier than Bryant had previously indicated — has left them in the dark as to whether their businesses might be exempt.

“It's really about this threshold. What does it mean to be far enough in the process to be allowed to go forward?” said Beau Allulli, who received a state-issued cannabis license and invested about $200K to set up his not-yet-open dispensary, Mighty Lucky. “It's kind of arbitrary right now.” 

Legal experts who spoke to Bisnow were divided about how to interpret Bryant's order. David Holland, a partner at Prince Lobel Tye, said he believes the wording will mean only license holders with site approval from the OCM and the municipality where they plan to operate will be able to move forward under the CAURD program.

“People are pretty disheartened,” he said. “They're on the brink of bankruptcy. If they are not able to convert these things into operations … nobody's got deep reserves of cash — nobody. The ripple effect is people that were in the CAURD program, they're not going to be able to go forward.” 

The end of the CAURD program could mean significant losses for any licensees. Jeremy Rivera, CEO and founder of dispensary Kush Culture Industry, submitted testimony to the court ahead of the judge’s decision, arguing that being prevented from opening would mean that his costs so far — $308.7K for architecture, engineering, contracting services, security equipment, signage, the lease for the business’s space and other costs — would be for nothing.

“I think everybody has had actual quantifiable harm since this program started. Mostly all of the CAURD applicants, we've only done what the state asked us to do,” he said. “People have sold their businesses ... in hopes of being able to find locations and start working towards that. So yeah, I think there needs to be consideration for all of CAURD applicants.”

There is a path for the OCM to avoid the worst consequences for CAURD licensees, said David Feder, founder of legal and consulting firm Weed Law. But it is hard to know how hard the OCM will fight to preserve existing CAURD licensees, he said.

“Monday is going to be a big day,” Feder said. “People are waiting with bated breath to know whether they're going to be on that list or not.”