Michigander Sues New York Over Residency for Cannabis Licenses

Variscite NY One filed the suit to gain access to the first round of licensing in the state.

A Michigander is suing the state of New York, the New York State Office of Cannabis Management (OCM), and its executive director, Christopher Alexander, over the state’s decision to award its first cannabis licenses to New Yorkers who have been incarcerated or arrested for the plant.

The case also targets the residency requirement. Variscite NY One, an LLC owned by Kenneth Gay, filed the case on Sept. 26. 

The New York adult-use cannabis program specifically wanted to address the social equity aspect of licensing and chose to award the first licenses to what it calls “justice applicants.” These applicants can be individuals who were convicted of or who had a parent, legal guardian, child, spouse, or dependent convicted of a “marihuana-related” offense in New York state prior to March 2021. 

Variscite said in its complaint that the company is owned by an individual who has a cannabis conviction under Michigan law. The complaint also states that the individual resides in Michigan and has no property or other significant presence in New York. 

Gay’s argument points to Maine and, specifically, the U.S. First Circuit which ruled in August that the dormant commerce clause applied to Maine’s medical cannabis industry. Maine dropped its residency clause. That loss raised fears that social equity requirements could also be called into question under the same argument. That seems to be the situation that is happening with Variscite.

Judge Gary L. Sharpe denied Gay’s request for for a temporary restraining order to halt the processing of license applications. The case is moving forward, and the state must reply by Oct. 26.

Current New York cannabis landscape

New York said it received more than 900 conditional adult-use retail dispensary (CAURD) applications during the first round of submissions. The OCM expects to award 150 in the first tranche but told stakeholders that there is no set limit to the number of licenses that could eventually be awarded.

Variscite also wants to be in the first round of 150 in order to have a first-to-market advantage, and if the company isn’t, it wants to receive damages. It also wants its lawyer fees covered. 

At this time in New York, the only legal adult-use cannabis being sold is on the Mohawk Indian tribal lands upstate. On Long Island, the Shinnecock Indian tribe is expected to open a retail store in association with Tilt Holdings (OTC: TLLTF) in February 2023, if everything goes according to plan.

The OCM had stated that it thought sales could begin by the end of 2022, but that has been mostly pushed to 2023 as challenges keep pushing the deadline.

1537000-1537535-variscite complaint (1)

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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