Federal Judge In NY Issues Preliminary Injunction To Block Retail Cannabis Licenses On Constitutional Grounds

• Published date: 01 December 2022
• Subject Matter: Government, Public Sector, Cannabis & Hemp, Constitutional & Administrative Law
• Law Firm: Sheppard Mullin Richter & Hampton
• Author: Mr Ross A. Honig and Hannah Zelcer

On November 10, 2022, in the matter Variscite NY One, Inc. v. State of New York, et al., the U.S. District Court for the Northern District of New York granted the plaintiff's a motion for a preliminary injunction against the State of New York ("NYS"), the New York State Office of Cannabis Management ("OCM"), and the Executive Officer of the OCM, Christopher Alexander issuing any cannabis licenses under NYS's conditional adult-use retail dispensary ("CAURD") application program in 5 of the state's 14 geographic regions.

Background

In a prior article, we covered the New York Seeding Opportunity Initiative ("SOI"), a regulation aimed at providing key opportunities for farmers, entrepreneurs and individuals that have been disproportionately impacted by the War on Drugs. Notably, the proposed regulation would give individuals that meet certain criteria the first opportunity to apply for a conditional adult-use cannabis license under New York's CAURD program held from August 25 to September 26, 2022 ("CAURD"). Applicants were able to select up to five geographic regions of NYS for which their application would be considered, including: Brooklyn; Capital Region; Central New York; Finger Lakes; Long Island; Manhattan; Mid-Hudson; Mohawk Valley; North Country; Queens; Southern Tier; Staten Island; the Bronx; and Western New York.

Pursuant to order 116 of Chapter II of Subtitle B of Title 9 of the Official Compilation of Codes, Rules and Regulations of the State of New York (the "Cannabis Regulations"), to become eligible for a CAURD license, applicants must meet certain criteria which includes, but is not limited to:

1. having a demonstrable and significant presence in New York;
2. being "justice involved," which means an individual that prior to the passage of the Marihuana Regulation and Tax Act ("MRTA") on March 31, 2021
   • was convicted in NYS for a cannabis related offense; or
   • had a parent, legal guardian, child, spouse or dependent that was convicted in NYS for a cannabis related offense; or
   • was a dependent of an individual convicted in NYS for a cannabis related offense; and
3. if the applicant is, or is controlled by a nonprofit organization, at least 51% or more of the applicant must be owned by an individual that satisfies the criteria set forth in (1) and (2) above.

Variscite NY One, Inc. v. State of New York et al.,

The plaintiff in Variscite NY One, Inc. v. State of New York, et al., is a corporation organized under the laws of NYS and is 51% owned by...