Judge clarifies New York adult-use marijuana ruling after creating chaos

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(This story was updated at 11:20 a.m. ET Friday with information about the judge’s clarification and more comments.)

New York’s adult-use marijuana industry rode a chaotic roller coaster the past two days, after a state Supreme Court judge on Wednesday struck down nearly all regulations for the market, only to issue a revised, much narrower ruling one day later.

Last year, Leafly Holdings sued New York’s Office of Cannabis Management (OCM), challenging the state’s ban on third-party advertising for cannabis retailers on free-speech grounds.

But in a scathing ruling dated April 3 that began to circulate Thursday, Albany Supreme Court Judge Kevin Bryant called the laws regulating adult-use marijuana in New York “unconstitutionally vague.”

The OCM offered a “complete lack of justification” for its own laws, wrote Bryant, who struck down nearly all of the statutes regulating the state’s industry.

However, late Thursday, Bryant issued a much narrower ruling.

When the later decision was posted to the court docket Friday morning, Bryant declared that the ban on third-party advertising was “null and void and arbitrary and capricious.”

In a brief statement emailed to MJBizDaily on Friday, a spokesperson for the OCM said that regulators are “reviewing the decision and exploring all possible legal options.”

The fluid situation sowed confusion among licensed marijuana operators and applicants still struggling to open state-regulated businesses.

It also delivered yet another blow to the industry’s teetering confidence in state regulators, whose rollout of an adult-use market has been described as a “disaster” by Gov. Kathy Hochul.

Industry reacts to ‘whiplash’

The serious “whiplash” caused by the judge signals more possible trouble ahead, said Fatima Afia, a cannabis lawyer at New York City-based Rudick Law Group.

“Though most of us in the industry breathed a big sigh of relief upon reading the amended order, the NY regulatory framework is not out of the woods just yet,” she told MJBizDaily via email.

In both his original and amended rulings, Bryant excoriated New York’s marijuana regulators, noting a “complete lack of justification” for state rules and a failure “to cite any evidentiary support in the record.”

That condemnation opens the door for other legal challenges, Afia said.

“In other words, the adult-use market in NY is still quite vulnerable even after the Leafly decision was amended, making business planning for applicants and licensees very challenging.”

New York’s regulated cannabis operators – already in a heightened state thanks to a botched rollout of adult-use sales that’s been plagued by lawsuits – reacted to the ruling with a mix of confusion and anxiety.

Callie Driehorst, a Leafly spokesperson, welcomed the ruling.

“We are pleased to hear that the court agreed with our claims after considering the facts,” Driehorst wrote in a statement.

“We hope this decision encourages the New York Office of Cannabis Management to consider a more reasonable approach to promote licensed and regulated cannabis in the state.”

Hochul last month launched a top-to-bottom audit of the OCM’s setup and functions, and rumors have been percolating that the jobs of top regulators are in jeopardy.

New York market upheaval

New York’s regulated marijuana market is still struggling to find its footing almost three years after state lawmakers passed the Marijuana Regulation and Taxation Act (MRTA).

Scandal-plagued former Gov. Andrew Cuomo, who signed MRTA into law in 2021, was slow to make key appointments to the OCM and its CCB.

A series of lawsuits also plagued the rollout of legal marijuana in New York, including its vaunted Conditional Adult-Use Recreational Dispensary (CAURD) program, which reserved the first licenses for social equity applicants.

As of Thursday, only 99 businesses were licensed to sell marijuana in New York state, according to the latest OCM data.

Recreational marijuana sales in New York barely topped $150 million in 2023 – even as Missouri, which legalized adult-use sales almost 18 months after New York, topped $1 billion in sales.

New York also is home to perhaps the country’s most audacious illicit market.

The number of unlicensed sellers in New York City alone are estimated to be as high as 2,000.

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