Federal judge blocks New York regulators from licensing pot shops

A federal judge in New York has issued an injunction barring the state from issuing licenses to cannabis retailers in five regions after a Michigan-based company filed a lawsuit challenging the process by which the sought-after licenses were granted. US District Court Judge Gary Sharpe issued the injunction Thursday in response to a lawsuit filed by Variscite NY One Inc., a company that was denied a retail dispensary license by the New York City Office of Cannabis Management (OCM).

In August, the OCM announced that the first CAURD (Conditional Adult-Use Retail Dispensary) licenses would be issued to businesses run by people with past convictions for marijuana crimes. Regulators are currently processing applications, with retail sales of adult-use cannabis expected to begin before the end of the year. Successful applicants will receive support from a $200 million Social Equity Cannabis Investment Fund established to fund the leasing and outfitting of up to 150 recreational marijuana dispensaries statewide.

“We think that by leaning on people who not only deal with the law but also have that business experience, we will find a range of applicants who have overcome some significant challenges to continue opening and growing successful businesses.” operate,” OCM executive director Chris Alexander told Politico when the policy was announced. “We just took a different approach.”

Dispensary licenses reserved for those who believe in cannabis

To qualify for a cannabis retail license, applicants must be residents of New York, as evidenced by a home or business address provided on the application. Also, a lead applicant or relative in New York must have been convicted of a cannabis-related offense. Those arrested but not convicted and those with state or extrastate convictions are ineligible.

Variscite is majority owned by Kenneth Gay, who was convicted of a Michigan marijuana felony. However, the application was denied by the OCM because Variscite “is [51%] according to a local media report, “belongs to an individual who has a cannabis conviction under Michigan law” and “has no significant connection to New York.”

The company filed a lawsuit challenging the eligibility criteria for retail cannabis licenses, arguing that limiting licenses to applicants with New York convictions discriminates against applicants from abroad and violates provisions of the US Constitution that protect interstate commerce.

The ruling affects five New York regions

In a ruling on Thursday, the judge said the state, represented by prosecutors, had not convincingly argued how closely New York’s law and regulations legalizing cannabis were tailored to a legitimate purpose. He noted that Variscite “has also shown a clear likelihood of success in this matter”.

Sharp also issued an injunction barring OCM from issuing cannabis retail licenses in the state’s Finger Lakes, Central New York, Western New York, Mid Hudson and Brooklyn regions, which Variscite listed in its application as preferred business locations. About 63 of the expected 150 CAURD licenses have been suspended by the ruling. Licenses scheduled to be issued in 11 other regions, including the Bronx, Manhattan, Queens, Staten Island and Long Island, were unaffected by the injunction.

Although the injunction was limited to the five regions indicated, David C. Holland, a partner at Prince Lobel and a member of the law firm’s business litigation and cannabis practice groups, said the case could ultimately affect a broader New York area.

“This could have broader implications across the state, as 14 New York regions have been imposed the same state-specific contact and sentencing requirements intended for the establishment of a CAURD dispensary, which may have prevented those involved in the justice system from other states due to.” in the state’s efforts to protect and promote its burgeoning cannabis industry,” Holland wrote in an email to High Times.

In a statement, OCM spokesman Freeman Klopott declined to comment on the case or Sharp’s restraining order.

“We do not comment on pending litigation. The Office of Cannabis Management is committed to the goals of the Marijuana Regulation and Taxation Act to include those affected by government enforcement of cannabis prohibition in the market we are building, and we are additionally committed to improving the cannabis supply chain of Making New York fully functional,” he told Klopott. “The Cannabis Control Board will shortly be submitting applications for a conditional use license as a retail adult pharmacy, which will begin with the closure of this supply chain.”

The spokesman added that the OCM will still review the initial licenses recommended for approval at its next meeting on November 21. Christian Kernkamp, ​​an attorney representing Variscite in the case, declined to comment on the injunction when contacted via email by The New York Times.