New York's Marijuana Regulators Reach Settlement Over Licensing Lawsuit

New York’s marijuana regulators have reached an agreement with a collective of disabled veterans who filed a lawsuit over the state’s licensing process.

While the settlement is still pending finalization, its completion is expected to lead to the lifting of a temporary injunction that has been in effect since August, as reported by New York Daily News.

The August-imposed injunction, enacted by the New York State Supreme Court, has halted the opening of over 400 conditional adult-use retail dispensary (CAURD) license holders statewide for several months.

New York’s marijuana regulators launched the CAURD program to give individuals who suffered from the war on drugs before legalization and ran successful businesses for a minimum of two years an opportunity to enter the legal industry. The aim is to establish a marijuana industry with a strong focus on social equity.

However, the lawsuit contended that the state’s regulations went beyond their authority, violating cannabis law by giving preference in the retail license application process to individuals with marijuana-related offenses and their families rather than opening it to the broader public as outlined by the law. Additionally, the lawsuit claimed that the award system contravened the state constitution. It further stated that disabled veterans could qualify as social and economic applicants under New York’s cannabis law, entitling them to specific licensing priorities and benefits.

As a result of the injunction, the issuance of new retail licenses and the opening of additional dispensaries came to a standstill, significantly affecting the already slow state licensing rollout.

Although the New York State Supreme Court allowed a few exceptions to the injunction, most of the hundreds of licenses were left in limbo, compelled to wait and incur financial losses from rent payments and contractual obligations they were obligated to meet.

The “agreement in principle” between New York’s regulators and the group of veterans is happening at a time when there’s a significant change in New York’s marijuana regulators’ approach to the rollout of cannabis licensing.

In September, marijuana regulators in New York opted to broaden their licensing program, opening it up to a more diverse pool of applicants. This decision paves the way for significant multistate operators to enter a market currently dominated by unlicensed dispensaries and a restricted number of small entrepreneurs. This shift follows regulators’ endeavors to prioritize social equity applicants in the launch of a legal marijuana market.

The lawsuit brought forth by the veteran group is not the sole legal challenge faced by New York’s marijuana regulators.

In March, New York’s medical marijuana operators lodged a complaint against the state’s regulators, aiming to secure the issuance of licenses for all retail dispensary applicants. They claimed unconstitutional overreach, failure of the agencies’ duties, and actions endangering the health and safety of New Yorkers in their allegations.

In the past year, Michigan-based company Variscite started a federal lawsuit against New York’s marijuana operators. This legal challenge targeted the CAURD program, seeking a preliminary injunction against its licenses in certain regions of New York. Variscite argued that the program’s preference for in-state operators was unconstitutional, hindering interstate commerce and thus violating the dormant commerce clause. The case was resolved in May of this year.

Since New York legalized marijuana in March 2021, the criteria for industry access were established to benefit individuals affected by marijuana prohibition policies before legalization through the CAURD program. However, this approach inadvertently led to the proliferation of thousands of illicit businesses across the state. The state has struggled to address and crack down on these businesses effectively. Lawsuits and delays in the implementation process further hindered the issuance of licenses for retail dispensaries. As of today, roughly 26 legal marijuana retail businesses are operational in the state.

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