New York cannabis dispensary openings halted by court order

No new weed shops will be able to open in New York, after a judge blocked cannabis regulators from moving forward with retail licensing on Monday.

The order is the latest blow to New York's ambitious effort to ensure that people harmed by marijuana enforcement are able the reap the financial benefits of legalization.

The ruling sides with a group of service-disabled veterans, who filed a lawsuit last week, arguing that a priority licensing program for entrepreneurs impacted by marijuana enforcement was unconstitutional.

The court is blocking the state’s cannabis regulatory agencies from issuing new licenses and from granting operational approval to those who are already licensed and working toward opening up dispensaries.

New York Supreme Court Justice Kevin Bryant ruled that without a court order blocking the cannabis licensing program, it appears “that there is genuine urgency and that immediate and irreparable injury, loss, or damage will result” if the licensing program moves forward, his order read.

The background: New York cannabis regulators attempted to roll out their recreational marijuana market with a bold licensing program that prioritized the first dispensary licenses for certain entrepreneurs with past cannabis convictions or immediate family members with past convictions.

Nonprofits that serve formerly incarcerated populations are also eligible for these licenses.

For entrepreneurs with past convictions, the state designed a program that would pair them with real estate and capital. But that program has faltered, with fewer than 20 storefronts open for business almost 2½ years after the state first legalized marijuana. A thriving illicit market, with hundreds of unlicensed shops, has sprung up in the meantime.

The wait has angered entrepreneurs like the veterans bringing this lawsuit, who are also supposed to receive priority licensing under the 2021 legalization law. That law defines “social and economic equity applicants” as people from communities disproportionately impacted by cannabis enforcement, minority-owned businesses, women-owned businesses and service-disabled veterans.

More context: A trade group made similar arguments in a lawsuit filed in March, arguing that prioritizing entrepreneurs with cannabis convictions amounted to overreach by the agencies. Meanwhile, the agencies are facing a lawsuit from hemp beverage businesses challenging their emergency hemp rules.

A spokesperson for the Office of Cannabis Management did not immediately return a request for comment, but said after the lawsuit was filed that the agency does not comment on pending litigation.

The impact: Entrepreneurs like Osbert Orduña won’t be able to move forward with opening their dispensaries if the court continues to block the program. Orduña is part of a team that won a license reserved for justice-impacted entrepreneurs and is also a service-disabled veteran.

His business, which is already doing deliveries, is in the process of starting construction on a storefront in Queens, which won't be able to open up shop under the court order.

In other cannabis markets with social equity programs like Illinois and Michigan, “special interest groups have found ways to pit one social equity group against the other,” Orduña said in an interview. “Divide and conquer.”

Service-disabled veterans who have won early retail licenses like Orduña as well as those who have processing or cultivation licenses are “going to suffer” because of the court order, he said.

What’s next: A hearing in the case is scheduled for Aug, 11 at 10 a.m. at the Ulster County Supreme Courthouse in Kingston, N.Y. Parties in the case have an Aug. 9, 5 p.m. deadline to upload filings before the hearing.