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New York Judge Halts Licensing for Cannabis Dispensaries

The judge issued a restraining order temporarily banning regulators from issuing licenses until a new lawsuit by a group of veterans is resolved.

The issue of what constitutes “social equity” is coming under sharp legal scrutiny this week in New York. According to multiple media outlets, a New York judge issued a temporary injunction on Monday barring state marijuana regulators from issuing licenses for retail cannabis dispensaries.


The drastic action comes in response to a lawsuit filed last week by a group of military veterans challenging the legality of rules for obtaining the coveted permits. The suit argues that the state’s licensing regulations, which limit the first round of Conditional Use Retail Dispensary (CAURD) licenses to individuals with prior marijuana convictions, violate state law and New York’s Constitution.


The plaintiffs in the case include four veterans with combined service totaling more than two decades in various branches of the U.S. military. By restricting the licenses to just those with cannabis convictions, the group contends that the actions of state regulators were not approved by state lawmakers when they passed the Marijuana Regulation and Taxation Act (MRTA) in 2021, legalizing adult-use cannabis.


The MRTA contains provisions establishing a goal of awarding at least 50% of the state’s retail adult-use cannabis licenses to social and economic equity applicants. Per those stipulations, New York Governor Kathy Hochul launched a program last year to reserve the state’s first CAURD retail marijuana dispensary licenses for “individuals most impacted by the unjust enforcement of the prohibition of cannabis or nonprofit organizations whose services include support for the formerly incarcerated.”


To qualify for a CAURD permit under the new program, applicants must either have a previous cannabis conviction or be the family member of someone with a conviction, among other criteria. Furthermore, nonprofit organizations with a history of providing services to current or formerly incarcerated individuals are also eligible to apply for licensure. To date, the Office of Cannabis Management (OCM), the state’s cannabis regulatory agency, has awarded 463 CAURD licenses, despite less than two dozen dispensaries opening statewide.


According to Matt Morey, an attorney and legal analyst, the MRTA designates service-disabled veterans as a sub-class of social and economic equity applicants, and therefore the OCM should prioritize licensing for retail cannabis businesses to veterans seeking approval as well. So far, however, the OCM has only granted licenses to justice-involved applicants.


In an interview with Spectrum News, Morey said, “The statute specifically included those individuals as individuals that would be prioritized with respect to applying for and gaining approval of an adult-use retail license.”


"The statute specifically included those individuals as individuals that would be prioritized with respect to applying for and gaining approval of an adult-use retail license.”

- Matt Morey, attorney and legal analyst


The lawyers for the veterans’ group argue this program unfairly and improperly excludes a wide range of suitable social and economic equity applicants, including disabled veterans and members of minority groups. By only including a very narrow subsection of the potential pool of qualified individuals, the suit also contends that state officials are blatantly violating the MRTA statute’s intent and the very foundation of the state Constitution.


“Individuals like service-disabled veterans, who are also social equity applicants, who should be prioritized under the MRTA – the Marijuana Regulation and Taxation Act – the plaintiffs are arguing that they’ve been harmed by being left out of this first mover’s advantage,” said Fatima Afia, an attorney for the plaintiffs.


"Individuals like service-disabled veterans, who are also social equity applicants, who should be prioritized under the MRTA – the Marijuana Regulation and Taxation Act – the plaintiffs are arguing that they’ve been harmed by being left out of this first mover’s advantage."

- Fatima Afia, attorney for the plaintiffs


The case also places the group in a very uncomfortable and unfamiliar position of having to challenge their government. When asked about the lawsuit, William Norgard, a U.S. Army veteran and one of the plaintiffs in the case, said, “It’s out of character for a veteran to sue the state to uphold a law. We take oaths to defend the laws of our nation and trust — maybe naively — that government officials will faithfully and legally execute those laws. What the Office of Cannabis Management is doing right now is in complete breach of that trust. As veterans, we know that someone has to hold the line.”


"It’s out of character for a veteran to sue the state to uphold a law. We take oaths to defend the laws of our nation and trust — maybe naively — that government officials will faithfully and legally execute those laws. What the Office of Cannabis Management is doing right now is in complete breach of that trust. As veterans, we know that someone has to hold the line.”

- William Norgard, a U.S. Army veteran and one of the plaintiffs


The temporary restraining order prohibits the OCM from granting or processing new licenses until the court case resolves. When asked for a comment following the filing of the suit, a spokesperson said the agency refrains from commenting on pending litigation. However, when the OCM received notice of the injunction, it issued a boilerplate statement indicating it would immediately comply with the judge’s order.


The sudden halt in the licensing process comes at a most inopportune time for the fledgling legal cannabis industry in New York. Plagued by delays and a powerfully entrenched illegal black market, this latest suit and the accompanying injunction will only add to the wait for New Yorkers eager to partake in what should become one of the nation’s most dynamic and financially powerful recreational markets.


Echoing those sentiments, State Senator Jeremy Cooney, the chair of the New York State Senate Subcommittee on Cannabis, released a statement on Monday evening in response to the judge’s temporary injunction.


In it, he stated, “I am deeply disappointed in today’s court decision, which temporarily stops the awarding of conditional cannabis retail licenses in New York State. It is no secret that New York’s adult-use cannabis roll-out has been slower than expected, and now is not the time to stand in the way of progress made. We must focus on awarding non-conditional licenses, which will prioritize social equity candidates and allow more businesses to open.”


"I am deeply disappointed in today’s court decision, which temporarily stops the awarding of conditional cannabis retail licenses in New York State. It is no secret that New York’s adult-use cannabis roll-out has been slower than expected, and now is not the time to stand in the way of progress made. We must focus on awarding non-conditional licenses, which will prioritize social equity candidates and allow more businesses to open.”

- State Senator Jeremy Cooney


Despite the senator’s disappointment and the inevitable delay the veterans’ suit may cause, the rule of law and fair play must win over an economic need to expedite the process. Social equity is a vital but tricky element to execute when establishing a balanced adult-use cannabis market in any given state.


If only some voices are heard, and only a few are given a seat at the table, the entire exercise is pointless. Getting it right is worth the wait. The brave women and men who fought to protect those rights we herald so proudly to the rest of the world have more than earned the right to be recognized and rewarded.


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