New York’s marijuana licensing program is under attack once again, this time from a microbusiness hopeful who alleges that the social equity approach taken by lawmakers and regulators violates the U.S. Constitution’s Equal Protection Clause by giving “disfavor to white men.”
The lawsuit, filed on Jan. 24 in U.S. District Court in the Northern District of New York by Valencia Ag LLC, argues that business advantages for minority and women entrepreneurs written into the 2021 state law that legalized recreational marijuana – including a goal of awarding 50% of all cannabis licenses to social equity entrepreneurs – are unconstitutional and illegal.
It also charges that the state Office of Cannabis Management and the Cannabis Control Board knew that they were heading down an illegal path with the development of the social and economic equity (SEE) criteria. The lawsuit asserts that the discounted licensing fees and other perks for minority and women applicants is discriminatory.
“Defendants enacted regulations and procedures that provide favor and preference to persons of a selected race or gender to the exclusion of Caucasian or white men for applications for cannabis licenses,” the lawsuit states. “In doing so, Defendants violated the Equal Protection Clause of the United States Constitution.”
Valencia Ag LLC is based in the Syracuse suburb of Jamesville and owned by “males of light pigmentation who might best be described as Caucasian or white men,” according to the lawsuit. The company’s registration with the secretary of state does not identify any owners.
According to the suit, Valencia Ag applied for a microbusiness license during the general application window that was open from October to December last year, but it first secured a real estate location because regulators indicated that such retail applicants would be fast-tracked. The company is now locked into a $2,000-a-month lease plus the cost of utilities.
When the state released its randomized queue for license reviews on Jan. 12, the owners found they were at number 2,042. Once OCM officials announced they would be awarding just 110 microbusiness licenses and 250 retailers, the Valencia Ag owners realized they “will almost certainly not be granted a license in the foreseeable future.”
“SEE applicants, who were favored and preferred, are ranked higher on the list and thus will enjoy a ‘head start’ in being granted a license, with its attendant quick earnings of revenues and profits, its encountering less competition, and its early establishment of customer loyalty,” the suit stated.
The OCM and CCB also should have expected such a legal challenge, the suit charges, precisely because of a court order issued in late 2022 when Michigan resident Kenneth Gay filed suit and alleged that residency requirements in New York’s conditional adult use retail dispensary (CAURD) program at the time were also unconstitutional, and kept his company, Variscite NY One, illegally out of the running. A court order at that time kept regulators from issuing retail licenses in several regions across New York state.
The state settled that lawsuit out of court in exchange for a recreational marijuana retail license for Variscite NY One, but the attorney who brought it just sued the state again last month on behalf of new plaintiffs, Variscite Four and Variscite Five. That case is ongoing and also has the potential to freeze retail licensing in New York once more.
Valencia Ag alleged that the 2022 injunction “put Defendants on alert that their actions were of suspect legality and constitutionality.”
The lawsuit also notes that the definition of SEE applicants itself was isolated to “black persons, Hispanic persons, Native American or Alaska Native persons, and Asian and Pacific Islander persons.”
“The SEE applicants do not include either Caucasians or men. Nor do SEE Applicants include persons of Jewish heritage, Palestinians, Armenians, Persians, … nor those persons considered to be hermaphrodites, androgyne, or gynandromorph,” the lawsuit argues.
OCM, CCB Makeup Under Fire
The lawsuit also attacks the CCB and OCM’s racial makeup and suggests that OCM Executive Director Chris Alexander, CCB Chairwoman Tremaine Wright, and others were selected for their positions precisely because of their race or gender.
“The situation of having only minorities and women, and no white man, in the key positions associated with the OCM is statistically aberrant to such a degree as to lead to a reasonable, fair conclusion that the Defendants were selected to their aforementioned positions on the basis of race and gender,” the lawsuit asserts.
Valencia Ag is requesting the court award punitive damages and an award of “lost profits,” along with a court order that:
- Throws out all SEE licenses for minority- and women-owned businesses.
- Bars the OCM from issuing licenses based on race or gender.
- Revokes any such licenses that have been issued to date.
- Refunds all SEE application fees to applicants.
- Forces the OCM to make all future application fees equal for all demographics.
A spokesman for the OCM did not immediately respond to a request for comment Thursday.