Reverses ban triggered by lawsuit over rules
New York State can now issue licenses to people approved for marijuana retail shops in the Mid-Hudson region after an appeals court reversed a months-old ban by a federal judge.
A federal appeals court ruled Tuesday (March 28) that the Office of Cannabis Management can license dispensaries in Brooklyn, central and western New York and the Mid-Hudson, where both Beacon and Cold Spring have opted to allow shops where people can buy marijuana for recreational use.
The state is now free to award the 34 licenses that will be granted by the Office of Cannabis Management in the Mid-Hudson, which is double what the agency had originally planned. (It increased its allotment from 150 to 300 licenses statewide.) As of March 2, it had received 900 applications and approved 66 licenses.
Retail applications in the five regions have been in limbo since Nov. 10, when the federal judge issued a preliminary injunction in a lawsuit filed by a company called Variscite NY One. They remain so in the Finger Lakes, but elsewhere in the state, retail operations have been opening, including, most recently, Upstate Canna Co. in Schenectady and William Jane in Ithaca.
Variscite NY One, whose owners are residents of California and Michigan, accuses the state of discriminating against out-of-state applicants because the first licenses prioritize New Yorkers with marijuana convictions and a “substantial presence” in the state.
Gov. Kathy Hochul said in a statement on Tuesday that she was pleased with the court’s decision. So was Dan Livingston, executive director for the Cannabis Association of New York, which represents dispensary owners and other businesses in the supply chain, although he said it was “unfortunate that the court is allowing this frivolous lawsuit to continue depriving entrepreneurs in the Finger Lakes.”
Tahlil McGough, deputy director of legislative affairs for the Office of Cannabis Management, wrote on LinkedIn on Tuesday that the agency has already finished “reviewing and scoring all applications for these newly freed regions.” During the injunction, the state’s Dormitory Authority also continued to scout for storefronts where applicants can open dispensaries, he said, “so we should not lose any time in getting everything rolling.”
In asking the appeals court to lift the injunction, Christopher Alexander, the executive director of the Office of Cannabis Management, denied that the application criteria discriminate against out-of-state applicants. He said that the judge had “ignored unrebutted evidence” that the injunction would harm other license applicants, growers and processors.
He and the state argued that if the stay remained, it should only apply to the Finger Lakes, which Variscite NY One has said is it first choice for a dispensary. Central and western New York, the Mid-Hudson and Brooklyn were the second through fifth choices, according to court filings.
Grant McCabe, who owns Smoker’s Mecca and The Leaf in Beacon, has to wait to apply because of the focus on people with marijuana convictions. But he is planning to pursue a license for Beacon when the state allows people without convictions to apply.
“I’m stoked that they’re actually going to open it up out here — other than just dispensaries in Manhattan and Albany and some of the other big cities,” he said.
Under the state’s Marijuana and Taxation Act, enacted in 2021, the criteria for the first batch of licenses are designed to benefit communities, primarily Black and Latino, in which justice advocates say residents were disproportionately arrested and prosecuted for marijuana offenses.
Regulations approved in July specify that applicants must have had a marijuana-related conviction before March 31, 2021 (or be a parent, guardian, child, spouse or dependent of someone with a conviction before that date) and have experience owning and operating a business. Certain nonprofits that serve former prisoners can also apply.
Applicants also must demonstrate “a significant presence” in New York, either by being a resident or incorporating a business in the state, and are awarded points if the owner’s address at the time of the conviction was low-income, public housing or in an area with high rates of marijuana arrests and convictions.
Although incorporated in Albany County, Variscite NY One lists its primary address as being in Beverly Hills, California. Its majority owner is Kenneth Gay, a resident of Battle Creek, Michigan, who was convicted of a marijuana crime in that state.
Although Variscite NY One’s incorporation in Albany meets the “significant presence” criteria, the company says it believes that the Office of Cannabis Management will “score an applicant higher” if he or she lived in New York state when arrested or convicted, or in a low-income area or one with high rates of marijuana arrests.
In opposing a lifting of the injunction, Variscite NY One claimed, as in its original lawsuit, that the residency requirement violates the Constitution’s Commerce Clause.
The operative term of the law is milquetoast: The legal limit in New York of the active compound (THC) in marijuana sold legally by retail shops is restricted to 3 percent — a borderline placebo, unless you’re a mouse — while varieties containing well over 20 percent THC can be easily sourced at lower prices, or homegrown. This the sort of high farce that follows when the government sticks its beak in where it doesn’t belong.
There is no limit to the THC content in marijuana sold in state-licensed retail shops, although a bill has been introduced in the Legislature that would limit the potency of cannabis flower to 15 percent THC and other products to 25 percent. Three percent THC is the legal minimum for a product to be called marijuana; otherwise it’s considered hemp.