New York adult-use cannabis licensing halted in court again

Legal woes are disrupting New York’s adult-use cannabis program yet again after a state judge on Thursday agreed to temporarily stop state regulators from processing thousands of pending business applications.

Albany County Supreme Court Judge Sharon Graf’s decision to grant a temporary restraining order bars the state’s Office of Cannabis Management from processing certain social equity applications as well as “any other provisional (adult-use) applications” received last year.

Graf’s ruling potentially affects thousands of applications.

The judge noted Thursday there are “approximately 340” Conditional Adult-Use Retail Dispensary (CAURD) applications “that have yet to be approved or denied” by the OCM and that an unknown number of the 3,189 applications received in December 2023 also sought provisional licenses.

An OCM spokesperson told MJBizDaily that the agency would not comment on pending litigation.

The agency must respond by Dec. 18, according to Graf’s ruling.

Marijuana social equity program

This latest setback, which follows years of similar interruptions, came in a legal challenge to New York’s contentious CAURD program, which is intended to prioritize social equity businesses.

Previous lawsuits – plus a robust illicit marijuana market – led New York Gov. Kathy Hochul to call the state’s rollout of adult-use sales a “disaster.”

The situation appeared to be turning around after new powers allowed law enforcement to shut down illicit operators, and a rush of new licensing put retailers on track to sell nearly $1 billion in licensed cannabis this year.

But now, frustrations and an uncertain delay are back.

Graf’s ruling was in response to a lawsuit filed last spring, in which four applicants for cannabis business licenses who submitted their paperwork during application windows argued that the OCM unfairly allowed CAURD applications to proceed despite not having a “municipally noticed secured location.”

Adult-use business applications submitted during two periods last fall had to have locations rented and approved for operation by local authorities, but that requirement was waived for CAURD applicants.

Allowing CAURD applications to proceed without having specific locations would potentially disqualify the plaintiffs’ business applications, which did require real estate to be secured.

That violated state law, they argued, and Graf agreed on Thursday.

In her ruling, the judge found that state regulators “have set up a scenario where a CAURD provisional license holder’s belated designation of a secured location would be too close to a non-provisional license applicant’s previously designated secured location and render the non-provisional license applicant’s secured location unacceptable.”

Permit applications halted

The OCM is now “enjoined from processing (CAURD) applications in which the applicant did not submit proof of a municipally noticed secured location on or before November 17, 2023, and are enjoined from processing any other provisional (adult-use) applications” pending any further action in a Dec. 18 hearing.

New York marijuana entrepreneurs reacted with disbelief and disappointment.

“This injunction shows the Grinch is real,” Osbert Orduña, a service-disabled veteran and CEO and co-founder of The Cannabis Place, told MJBizDaily on Thursday.

Orduña, who possesses a license for a marijuana store that’s open for business in Queens, applied for additional provisional licenses nearly a year ago during a permit window that closed in December 2023.

The OCM had yet to start processing any of the permit applications received during the so-called “December queue,” the agency’s acting executive director, Felicia Reid, said during Tuesday’s Cannabis Control Board meeting.

Orduña said he was already “not happy with the way the OCM process was moving.”

“Now this injunction has us frozen in place,” he added. “This is beyond disappointing.”

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.