Court challenges and bureaucratic roadblocks have created hurdles for would-be cannabis sellers in the state.
Since New York State legalized marijuana two and a half years ago, its effort to set up the industry has been a slow and bumpy ride.
By now, there were supposed to be more than 150 licensed dispensaries in the state selling products like edibles, smokable flower and vapes to everyone 21 and above. But — and this may come as a surprise to anyone seeing the bevy of smoke shops that have cropped up across the state — there are only 23 legal dispensaries, and many of them only offer deliveries.
The latest setback for the expansion of the retail program occurred in August when a state court order temporarily barred regulators from awarding and processing licenses for new stores. A judge subsequently replaced the order with an injunction that carves out an exception allowing stores that were just waiting for the final green light to open. The state has appealed the decision.
Here’s why a state judge put licensing on hold, and what it could mean for the future of the industry.
Why Is the Rollout Delayed?
In August, a group of veterans who became disabled during their military service filed a lawsuit challenging how the state was awarding its first dispensary licenses.
To qualify, individuals had to have been convicted of a marijuana-related offense before legalization, or have a close relative, like a parent or spouse, who was. They also had to have owned a profitable business for at least two years.
The veterans each met the business requirement, but they did not meet the conviction criterion. In the lawsuit, they argued that state cannabis regulators did not have the authority to create a new license for only one class of applicants. They said that power belongs to the Legislature, which mandated that everyone be able to apply for licenses at the same time.
Another group, led by companies currently licensed to sell marijuana to medical patients, filed a lawsuit centered on the same claim in March. But they did not ask to put a stop to licensing.
The veterans did. And the judge presiding over both cases, Justice Kevin R. Bryant of State Supreme Court in Kingston, N.Y., issued an injunction that freezes licensing until regulators open up applications to the general public in the fall, a process that he said would make the main legal argument in both lawsuits moot. He said he would grant exceptions for dispensaries that were just waiting to be told they could open, but so far, he has not allowed any of them to move forward.
The Office of Cannabis Management will begin accepting applications on Oct. 4, after its governing board approved regulations governing the market.
Would-be operators of legal marijuana dispensaries like this one in Schenectady have voiced frustration over delays in rolling out the state’s new industry.Credit…Cindy Schultz for The New York Times
So What Happens Now?
Beginning early next year, regulators are expected to issue as many as 1,500 licenses for businesses like plant nurseries, co-ops, dispensaries and distributors. The agency said it will accept new applications for 60 days, then give applicants 30 days to address any errors.
The licenses at the center of the lawsuits are conditional, four-year permits, whereas the new licenses will be permanent.
The future for hundreds of conditional licensees already working to open dispensaries may be tied up in court for several more months. The injunction put many of them at risk of going out of business and on the hook for millions of dollars collectively because they took out loans, signed storefront leases or hired contractors. They may need to reapply for licenses.
Beyond the dispensaries, there are more than 300 farmers and manufacturers with few places to sell their goods. Only about 18,000 pounds of cannabis have been sold in legal dispensaries since the first licensed retailer opened in December, a rate that would leave 564,000 pounds of cannabis sitting in the state’s stockpile by the end of the year, regulators have said.
Why Has It Taken So Long, Anyway?
For nearly five months after legalization, the former governor, Andrew Cuomo, and the Legislature were at an impasse over who should lead the new cannabis regulatory agency and its governing board. After Mr. Cuomo resigned in scandal, Gov. Kathy Hochul appointed the leaders of the Office of Cannabis Management and the Cannabis Control Board.
Since then, regulators like to say they have been building a plane as they’re flying it.
Among the hurdles faced by the industry was infighting between former Gov. Andrew M. Cuomo and state lawmakers over who should lead a new state regulatory body, the Office of Cannabis Management. The job ultimately went to Chris Alexander, right.Credit…Hiroko Masuike/The New York Times
The agency spent the next year hiring staff, drafting regulations and setting up the cannabis supply chain with growers and manufacturers. Then, in March 2022, Ms. Hochul announced her plan for the rollout’s final piece: dispensaries that would be owned by entrepreneurs with marijuana-related convictions.
Before licensing could begin, a Michigan man sued in federal court over the program’s residency requirements and obtained an order that initially blocked licensing in five of the state’s most populous regions. Regulators later agreed to give him a license in exchange for his dropping the suit.
That wasn’t the only hurdle. A crucial part of the governor’s plan was for a state-led investment fund to provide start-up loans and secure storefronts to help the first 150 licensees open quickly. But that plan struggled for months to find an investor and willing landlords with suitable properties, so regulators loosened restrictions to allow licensees to find and use their own resources.
At the same time that regulators began issuing dispensary licenses, they proposed rules for expanding the market. After a major revision and a legally mandated review period, the board voted to finalize those regulations in September.
There’s No Licensed Dispensary Near Me. Who Can Legally Sell Me Weed?
In the absence of licensed retail stores, the state has allowed retailers and producers to partner up and host farmers’ market-style showcases across the state. There, consumers can meet with farmers and manufacturers who grow and make legal products, smell their flower and taste drinks and candies that have not been infused. But only retailers can sell directly to consumers.
The Office of Cannabis Management provides a list of upcoming showcases on its website.
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