'Time Is Not On Our Side,' NY Pot Farmers Rally Against Illicit Market, Court Lifts License Injunction In Most Regions

An injunction preventing New York state regulators from issuing licenses for marijuana sales across various regions was lifted Tuesday by a federal court.

This means that the Office of Cannabis Management can now issue sales licenses to cannabis businesses in Central and Western New York, Mid-Hudson and Brooklyn. The ban remains in effect throughout the Finger Lakes region, reported Spectrum News 1.

"New York’s brand-new cannabis industry is making significant progress to promote social equity and right the wrongs of the past, creating the fairest and safest market in the nation,” Gov. Kathy Hochul said in the statement. “I am pleased that a federal appellate court has limited an injunction in favor of the State of New York in the matter of Variscite NY One, Inc. v. Office of Cannabis Management, et al."

Michelle Bodian, a partner at cannabis law firm Vicente LLP told Benzinga they were equally pleased with the decision "This is a great victory for NY state and all individuals who want to purchase legal cannabis. Unlocking more than 100 adult-use cannabis licenses throughout the state should help to meaningfully move the regulated NY market forward."

What happened

In November, Judge Gary L. Sharpe of the New York Federal District Court in Syracuse issued an order barring New York's retail cannabis dispensary application process in some state regions, making them wait to obtain Adult Conditional Use Retail Dispensary ("CAURD") licenses until a lawsuit filed by a Michigan-based company is resolved.

The Michigan company that was denied a license filed a lawsuit challenging the program’s selection requirements. Variscite NY One argued that requirements for applicants with a cannabis-related conviction under New York law and significant ties to the state violated constitutional protections of interstate commerce.

Even though Kenneth Gay, a majority owner of Variscite was convicted of a cannabis offense, his application was denied because the business “is [51%] owned by an individual who has a cannabis conviction under Michigan law” and “has no significant connection to New York,” reported News 10 at the time.

Officials from the Finger Lakes Region expressed disappointment at being left out of the new ruling. 

"While we celebrate the decision of the Second Circuit to lift the injunction for Western New York, Hudson Valley, and Brooklyn, we remain hopeful the Finger Lakes Region will soon be permitted to participate in this economic empowerment program administered by the NYS Office of Cannabis Management," said State Sen. Jeremy Cooney (Rochester-D). "Importantly, New York will not reach its goals for an equitable and thriving adult-use cannabis marketplace until all regions are open for business.”

The ruling comes on the heels of New York regulators announcing a plan to double the number of available retail permits for recreational cannabis social equity applicants to 300.

Farmers Rallying Against Illegal Market

Meanwhile, marijuana cultivators and sellers gathered at the capitol on Tuesday calling for harsher enforcement on the “thousands” of illegal weed sellers and for other bills that could help them survive in the new market, reported Times Union.

Farmers highlighted that a small number of operating retail pot shops is hindering their earnings and putting their businesses in jeopardy. Hemp farmer Brittany Carbone said farms are nearly broke and facing “a real and immediate threat.”

"Time is not on our side. ... The season is short and unforgiving," Carbone said. "We will not be able to survive these conditions much longer and will be out of business before the regulations are even finalized."

The state’s five running retailers cannot manage the number of marijuana products growers are offering, Carbone said.

Another issue brought up Tuesday was the challenge facing licensed pot shop owners as they compete with the illicit market, referring to a THC potency tax that makes prices much higher in the legal market and ultimately pushes consumers to buy from illegal sellers.

In February, Sen. Cooney introduced a bill that could change the current marijuana tax structure. Under the proposed measure (S4831), cannabis would be taxed at a flat 20% rate versus the current system, which is based on THC potency and flower weight. However, until that legislation becomes law, licensed operators are stuck with the ongoing challenge of competing with the illegal market, which is tough to completely shut down in spite of the state’s ongoing efforts.

Photo: Benzinga edit with images by EKATERINA BOLOVTSOVA on Pexels