A district judge in New York said on Tuesday that the state must hold off on doling out licenses to social equity applicants in certain regions while a case against it makes its way through court, Syracuse.com reported.
The development is another hurdle for the state’s adult-use rollout after a Michigan-based company, Variscite NY One, sued the state in October last year, arguing that the social equity program’s license requirements discriminate against out-of-state cannabis operators and violates the dormant commerce clause.
Variscite NY One requested an injunction in order to “preserve the status quo,” as the program had yet to issue any of the CAURD licenses. The company also argued that the program isn’t narrowly tailored enough to serve a “legitimate local purpose.”
At the time, U.S. District Judge Gary Sharpe wrote that the state’s Office of Cannabis Management “did not even attempt” to show that its restrictions advanced such a local purpose.
The injunction prevents the OCM from issuing some licenses under the conditional adult-use retail dispensary (CAURD) program, which restricts eligibility to applicants 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.
Later that month, regulators asked the court to lift the injunction in order to prevent “manifest injustice” and that by “unnecessarily” grouping the four other regions in the injunction (Central New York, Western New York, Mid-Hudson and Brooklyn), an additional 54 dispensaries will not be able to open.
The state told the court in November that if it were to deny the request to limit the scope, a request for a stay of the order would be submitted while it pursued an appeal.
“This will cause hardship to multiple stakeholders who have taken actions in reliance on the CAURD Program, most prominently licensed cultivators – mostly small family farms – who will have great difficulty selling their recently harvested product,” the state wrote at the time. “The resulting retail bottleneck can be significantly alleviated by narrowing the geographic scope of the injunction as requested.”
The state argued that since CAURD applicants are only considered for their first preferred geographical location, the court should modify the injunction to be limited to only Finger Lakes region – Variscite NY One’s first choice – rather than several localities. It added that because Finger Lakes was the plaintiff’s top choice, his initial application would not have even be considered in the other regions.
In Sharpe’s Tuesday decision to deny the OCM’s motion for a stay of the November order, he wrote that the state didn’t meet standards to change his mind regarding the November decision.
“Defendants’ arguments regarding irreparable harm to them, the relative lack of harm Variscite faces, and the public interest are … unpersuasive,” Sharpe wrote.