A state Supreme Court judge will hold a hearing Friday on a challenge to the state’s retail cannabis licensing rules that has brought New York’s troubled recreational marijuana rollout to a halt.
Earlier this month, Judge Kevin Bryant issued an injunction barring the state Office of Cannabis Management, or OCM, from licensing any new retail cannabis stores after four service-disabled veterans brought a lawsuit, saying that they were unfairly left out of the first round of awarded licenses.
They argued that, according to the 2021 Marihuana Regulation and Taxation Act, which legalized adult use of recreational cannabis in New York, the first retail licenses were to go to people convicted of a marijuana-related offense, veterans who incurred a disability due to their war service, minority- and women-owned businesses, and financially distressed farmers.
The veterans said OCM diverged from the statute when they set up rules that limited the first round of licenses to people with previous marijuana-related convictions.
Bryant agreed, ruling that since the Legislature did not amend the original law to alter that first category of licensees, there’s a “significant likelihood” that the four veterans will ultimately win their case. He ordered all new retail licenses to be put on hold until the case is decided.
Opponents of the lawsuit include Osbert Oduna, a retired Marine and service-disabled veteran who runs a cannabis delivery service in Queens. His business partner was convicted of a marijuana-related offense during prohibition.
Orduna – who has been conditionally approved for a license for a retail location but has not yet opened a store – is against the lawsuit. He said it only stalls an already impeded process and has a “chilling effect” on the fledgling industry.
“I'm opposed to anything that puts us versus them,” Orduna said. “Us being one social equity group against another.”
He said the licensing application process would have opened to the other groups, including the veterans and women- and minority-owned businesses, on Oct. 4. But that’s now also likely on hold due to the injunction.
The lawsuit isn’t the only factor that has slowed the legal cannabis rollout, and two years in, only 24 stores have opened out of about 160 outlets that were supposed to be up and running by now. Many in the struggling industry are increasingly concerned.
“It's unfortunate. This is possibly the worst thing that could happen to the small businesses and startups,” said Hal McCabe, the interim director of the Cannabis Association of New York, which represents small-scale, locally based growers and retail sellers. “Because it's frozen them in place, and it's frozen the supply chain.”
McCabe is also the mayor of the village of Homer, which is seeking to locate a retail outlet in the village and in the nearby city of Cortland.
He said small-scale farmers who were granted growing licenses last year grew 300,000 pounds of cannabis, and to date, only around 18,000 pounds have been sold. He said many are in danger of bankruptcy.
McCabe and Oduna believe that the delays will benefit the large-scale operations that currently sell medical marijuana in New York and operate large, efficient, indoor growing spaces.
Oduna said if the OCM follows its current rules, then the large companies will be eligible to apply for licenses in December.
“They're also going to be winners here,” said Orduna, who added the large operations can just “flip the switch” and devote half of their existing retail space to recreational sales.
McCabe said he believes that state lawmakers, the governor, and even the OCM have had the best intentions in trying to “right some wrongs” and give the first licenses to people most adversely affected by cannabis prohibition.
But he said so much has gone wrong.
“The rollout … has been ham-fisted at best,” he said. “It's a little bit strange to me that we have all the time, all the money, and the market, and the experience of all the other states who have gone before us to lean on. And we've still managed to screw this up.”
He said, meanwhile, an estimated 3,000 illegal, unlicensed cannabis dispensaries are thriving.
The judge did make some exceptions to the injunction. Conditional retail licenses granted before Aug. 7, when the lawsuit was filed, can go forward. Those approved after that date will be evaluated by the judge on a case-by-case basis. OCM has until the end of the day Thursday to get that paperwork in.
In a statement, OCM’s Taylor Randi Lee said the agency is disappointed with the judge’s decision but is proud to work toward the goal of establishing “a first-of-its-kind, adult-use cannabis market that works to right the wrongs of the past.”
Lee said OCM is applying to the court for exemptions from the injunction “on behalf of provisional licensees who are ready to open.” Lee said the agency won’t let the court case “derail” its efforts.
Friday’s hearing will be held in Kingston.
