Business
Federal Judge Blocks New York Regulators From Issuing Pot Shop Licenses
A federal judge has issued a temporary injunction barring New York regulators from issuing cannabis retail licenses in five regions in a case challenging the state’s eligibility requirements on constitutional grounds.
A federal judge in New York has issued a temporary injunction barring the state from issuing licenses for cannabis retailers in five regions after a Michigan-based business filed a lawsuit challenging the process for awarding the highly coveted permits. U.S. District Court Judge Gary Sharpe issued the injunction on Thursday in response to a lawsuit filed by Variscite NY One Inc., a company that was denied a retail dispensary license by the New York Office of Cannabis Management (OCM).
In August, the OCM announced that the first Conditional Adult-Use Retail Dispensary (CAURD) licenses would be issued to companies headed by individuals with past convictions for marijuana-related crimes. Regulators are currently processing applications, with plans for the retail sales of adult-use cannabis to begin before the end of the year. Successful applicants will receive aid from a $200 million Social Equity Cannabis Investment Fund, which was created to help finance the leasing and outfitting of up to 150 recreational marijuana dispensaries across the state.
“We think that leaning into folks who are not only justice-involved, but have that business experience means that we’re going to find a bunch of applicants who have gone through some significant challenges to still open and operate successful businesses,” OCM executive director Chris Alexander told Politico when the policy was announced. “We just took a different approach.”
Dispensary Licenses Reserved For Those With Weed Convictions
To qualify for a cannabis retail license, applicants must be based in New York, as evidenced by a personal or corporate address included on the application. Additionally, a principal applicant or relative must have been convicted of a cannabis-related offense in New York. Those who were arrested but not convicted and those with federal or out-of-state convictions are not eligible.
Variscite is majority owned by Kenneth Gay, who was convicted of a marijuana offense in the state of Michigan. The application was rejected by the OCM, however, because Variscite “is [51%] owned by an individual who has a cannabis conviction under Michigan law” and “has no significant connection to New York,” according to a report in local media.
The company filed suit challenging the retail cannabis license eligibility criteria, arguing that restricting the licenses to applicants with New York convictions discriminates against applicants from out of state and violates provisions of the U.S. Constitution that protect interstate commerce.
Ruling Affects Five New York Regions
In a ruling handed down on Thursday, the judge said that the state, represented by the attorney general’s office, had not convincingly argued how New York’s cannabis legalization law and regulations were narrowly tailored to serve a legitimate purpose. He noted that Variscite “has also demonstrated a clear likelihood of success on the merits.”
Sharp also issued a temporary injunction barring the OCM from issuing cannabis retail licenses in the Finger Lakes, central New York, western New York, the Mid Hudson, and Brooklyn regions of the state, which Variscite had listed on its application as preferred business locations. Approximately 63 of the anticipated 150 CAURD licenses were put on hold by the ruling. Licenses to be issued in 11 other regions, including the Bronx, Manhattan, Queens, Staten Island, and Long Island, were not affected by the injunction.
Although the injunction was limited to the five specified regions, David C. Holland, a partner at Prince Lobel and a member of the law firm’s business litigation and cannabis practice groups, said that the case could eventually affect a broader area of New York.
“This could have a wider impact across the entire state as the same state-specific contact and conviction requirements were imposed in 14 regions in New York, which are designated to set up a CAURD dispensary and may have prevented justice-involved individuals from other states from applying for a conditional license because of the state’s efforts to protect and promote its emerging cannabis industry,” Holland wrote in an email to High Times.
In a statement, OCM spokesman Freeman Klopott declined to comment on the case or Sharp’s injunction.
“We don’t comment on pending litigation. The Office of Cannabis Management is committed to the Marijuana Regulation and Taxation Act’s goals of including those impacted by the state’s enforcement of cannabis prohibition in the market that we are building and we are additionally committed to getting New York’s cannabis supply chain fully operational,” said Klopott. “The Cannabis Control Board will soon have before it applications for the Conditional Adult Use Retail Dispensary license which will start closing that supply chain.”
The spokesman also added that the OCM would still review the initial licenses recommended for approval at its next meeting on November 21. Christian Kernkamp, an attorney representing Variscite in the case, declined to comment on the temporary injunction when contacted via email by The New York Times.
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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