Has the interstate trade just come to cannabis in New York? Federal Judge Stops NY CAURD Dispensary License Program

Cannabis glut states may just have found a market for all their weed!

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Written by David Rabinovitz

on Friday, November 11th, 2022

Has the interstate trade in cannabis just come to New York?

The over-supplied cannabis state embers may have just found an outlet

On November 11, 2022, a New York federal judge issued an injunction barring the New York State Office of Cannabis Management (OCM) from issuing adult-use contingent retail licenses (CAURD) “for the following geographic areas: Finger Lakes ; central New York; Western New York; Mid-Hudson; and Brooklyn while this lawsuit is pending or otherwise served by a court order.” These licenses are commonly referred to in the cannabis industry as social equity licenses.

The litigation began in September when an applicant from upstate New York failed to qualify for the CAURD program. The affected regions appear to be the areas selected by the body that was denied an application. It is speculated that other similarly situated parties will copy the lawsuit and drop the CAURD program entirely. (read the original complaint here and read the injunction here)

I read about it in September/early October and remembered thinking the challengers were going to win. After a federal appeals panel in Boston ruled in August that the dormant trade clause applies to cannabis and that the state of Maine can’t prevent out-of-staters from owning medicinal dispensaries, this New York lawsuit seemed like a bull’s eye . Based on what I read about the Commerce Clause at the time, I argued that the OCM could take safeguards by adapting the CAURD program to benefit everyone, regardless of the state they live in, as long as the person was convicted by a New York court. I am not an attorney, but it seems to me that this is a legal distinction that the OCM can make and that stands up to judicial scrutiny. Live anywhere, but the damage must have been caused by a New York conviction. That would eliminate New York residents who were not convicted in New York, but also anyone convicted elsewhere and not in New York. It could pretty much save the CAURD program.

The eureka problem here is that a federal court in New York recognized the DCC for cannabis. Interestingly, they did so without reference to the Boston federal appeals decision. Boston is the 1st circuit and includes Maine, New Hampshire, Massachusetts, Rhode Island and Puerto Rico. New York is the 2nd circuit. Although this case is not yet awaiting appeal, a decision by the 2nd Circuit in the states of Connecticut, New York and Vermont is binding at the appeal level.

If the DCC applies to cannabis, as I noted in an April article, all state cannabis regulations are unconstitutional in that they prevent licensees from purchasing only from state suppliers. It takes a simple lawsuit against the regulator to remove this restriction. This decision could quickly pave the way for the cannabis trade between New Jersey, New York, Connecticut, Rhode Island, Vermont and Massachusetts. The supply glut in Massachusetts could be resolved immediately, and high opening prices in New York may not materialize amid strong supply from overcrowded neighboring states. Most published articles lack this key point.

The “wow” problem isn’t that the CAURD program has two flat tires and will soon run out of gas, but that interstate commerce is getting closer to reality as court decisions level the table for interstate commerce. I got gutted for this view in April but I’m doubling today! Washington, DC is mired in hate and deadlock. Cannabis advances will take place in court, fueled by decisions like these.

rely on it!

David Rabinovitz is a cannabis management consultant based in Massachusetts and involved in various cannabis ventures. He is a former director and treasurer of MassCann (the Massachusetts Cannabis Reform Coalition), a former trainer for the Massachusetts Cannabis Control Commission’s social justice training program, and the original host of the cannabis business talk show The Green Rush on ProCannabis Media. David speaks at various industry events about creating compelling financial presentations that investors love. David’s industry insights and analysis are published in multiple media. Connect with David on LinkedIn at https://www.linkedin.com/in/davidrabinovitz/ or contact him at drabinovitz@gmail.com or DavidR@CannaVentureLabs.com

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